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From Real-life: Payday loans & Short term loans – Advantages & Disadvantages

Payday loans, or short term loans as they also are called, are becoming a common resource for emergency funds these days.

Here are the major advantages and disadvantages of short term loans to you as a borrower, written by a borrower with experience from real-life (badly needed in the finance).


  1. Short term loans are a fast source of cash in a financial emergency. If your car has broken down or you have to have a tooth filled – or you just need a little extra help meeting the rent payment this month – a  short term loan can provide the money you need, often within a matter of hours.
  2. Many short term loans do not require a credit report. If your credit has been damaged or you haven’t established a credit rating yet, your eligibility for a short term loan may not be affected.
  3. Short term loans may save you money. Covering your bills with a short term loan may allow you to avoid charges for things like bounced checks, bank overdrafts and credit card fees. Other big publications on the Internet don’t seem to understand this, just because it cost $150 in interest doesn’t mean it’s a bad deal automatically.
  4. Short term loans can protect your credit rating. When you take a short term loan to tide you over for a few days and help you meet your financial obligations, you can avoid a mark against your credit rating.
  5. Short term loans allow you to be independent. If you are young and just learning how to balance your budget, you may not always manage to have enough cash on hand to meet your expenses from one paycheck to the next. Using a short term loan means that you do not have to beg your family for money.


  1. Short term loans are for a short period only. If you need a loan for several months or longer, a short term loan is not going to help you.
  2. Short term loans involve fees and interest payments. The charges associated with a short term loan are quite a bit higher than for a standard bank loan. And if you are unable to pay your loan in full by the contracted time, the fees may double.
  3. Short term loans may require the borrower to be at least part-time employed. If you are receiving unemployment benefits or social assistance, you may not be eligible for this type of loan. Your before tax income should be at least $1,000 per month.
  4. Short term loans may also require you to have a current bank account or credit card.
  5. Short term loans are for relatively small amounts. Generally short term loans are issued for amounts of up to $1,000. If you are looking for a larger sum, even if it’s only for a short time, you will most likely have to find another source of funds.
  6. Short term loans may be offered by a fraudulent source. Especially if you are applying for a short term loan online, it’s important to check out the company you plan to borrow from. Make sure that they are trustworthy. Some less trustworthy brokers may resell your information. This site have done the hard work for you, only listing trusted direct lenders and the best brokers.

Please see our list of short term loan offers here.

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Grace Chen
Grace Chen - Writer & Editor
A graduate of the Haas School of Business, University of California, which is one of the top three (3) business schools in the U.S., Grace Chen has 10 years of experience in this field and have been delivering stellar business content through her written word. She’s the chief editor of Communicate Better and has written and edited thousands of content published in various online and printed media, including the NYSE-sponsored research studies and MEC Global. Connect with Grace on LinkedIn, https://www.linkedin.com/in/grace-chen-9254ab8/