Many people live closer to the edge financially. They work and support their families as well as they can. They pay the rent, put food on the table, and try to put some money aside.
But, when you are living paycheck to paycheck, a single emergency can turn things upside down. It might be the $250 to replace the water pump on the car you need to get to work. It could be the $300 bill from the emergency clinic for treating your child’s soccer injury. It can be any unexpected expense that throws you against the wall.
There are options for people who find themselves in such binds, needing money in a convenient, easy, and helpful format. NerdWallet, for example, points out, “Most lenders will let you check rates without affecting your credit, so you can shop around at multiple lenders.”
But, you should learn the differences between these 4 types of short-term loans.
Financial terms everyone should know:
- Personal loans
Children will always turn to their parents for money. Sometimes, they need help with their prom expenses; sometimes, they need help coming up with a down payment on their first home. When parents have the money, they will generously gift them with the money.
Some parents want to put that loan in writing because the loan is not backed by collateral. Personal loans may or may not have an interest rate attached. But, the real problem is one of trust. Personal loans can strain family and friend relationships.
- Secured personal loans
These loans are secured with collateral the lender can seize if you fail to pay off the loan. Home mortgages and car loans are secured personal loans. Mortgages are common but complex documents. But, short-term car loans are becoming more accessible.
In these loans, you put up your car title as collateral for emergency money to be repaid on a scheduled short-term basis.
- Credit card cash advance
Most credit cards issue short-term cash advances. You can use your bank’s ATM for a limited advance. Few loans are more convenient, but it can be an expensive way to go.
Interest rates on credit card cash advances are typically higher than other loans and higher than the rate on credit card purchases. And, there may be additional cash advance fees.
- Same day loans
At Pretty Penny Loans, “Same Day Loans are a fast and simple way of getting credit using a prompt and painless online process or over the phone.” These type of loans should be taken out only for emergencies. They can be high-interest loans, so make sure you can pay back the loan on time.”
Lenders deposit up to $1,000 directly to your bank account and debit your account when payment is due. The application is easy, and the process is more convenient than traditional banks. As The Wall Street Journal says, “Banks say that small-dollar consumer loans are difficult to make on a large scale, because the underwriting process is too costly given the small profit they make on each loan.”
Picking up on the financial terms everyone should know
You may need money in case of an emergency. You may even need it more than once. And, as helpless as you may feel, there are options to get you through the hard times.
This short list of financial terms does not exhaust all the possibilities. Your checking account, for example, may have a line of credit built-in. But, this review should clarify some options for those who feel pressed to make emergency decisions.
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