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What are short term loans and how do they work?

Emergency situations may arise at any time and you may not be able to squeeze out money from your budget to manage the situation. In that case you may have to take out loans for meeting the emergency financial situation as you can’t wait for your next payday. Short term loans are basically payday loans that come with a repayment period of 2 weeks to a month. How short term loans work Short term loans are available without credit checks and are unsecured loans. As the short term loan lenders do not check your credit before lending you the money, they generally charge you high interest rate. You are supposed to pay back the loan amount within the next payday. Generally, many lenders require you to give your account details to the lender so that they can withdraw the money after your payday. Thus, it is quite dangerous to get a short term loan. You will have to manage to pay off the borrowed amount within the stipulated time or your bank accounts can get garnished. Also, remember to not give out your account details to a short term lender. Before taking out a short term loan, you should also check out the state laws. Some states have put a ban on short term or payday lending. Mistakes you should avoid The interest rates on payday loans are quite high so try to repay on time. Otherwise, the interest may accumulate into large amount within few months. Thus, before taking out pay day loans assess your financial situation and make sure to repay the loan with your next paycheck. Many of the social lending websites offer short term loans. Generally, the interest rate doesn’t exceed 10%. However, you should make sure to repay the loan on time. Otherwise, you’ll have to pay late charges, thereby impacting your credit rating negatively. You may also take out a cash advance on your credit card. However, you should know that a credit card company doesn’t allow grace periods for such cash advances. Thus, the interest starts piling up if you fail to pay the borrowed amount. Thus, you should try your best to pay off the amount within stipulated time.