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Responsible borrowing

Short term loans are not suitable for everyone. Please consider carefully whether this is the right option for you before taking out this type of loan.

Consider all your options

There are many other ways to borrow money, often much cheaper. Talk to your bank about an authorized overdraft or a personal loan. It’s a slower process, and they have more stringent conditions, but it’ll cost you less. Your employer may give you an advance against your pay. Friends and family may be able to help you out.

Don’t borrow too much

Short term loans generally have high interest rates. The more you borrow, the more it’ll cost you. Interest payments can rack up fast, and if you miss a payment, it can be very expensive. Short term loans are intended for emergencies, not for some quick extra spending money. Only borrow what you actually need and make sure you pay it back on time.

Figure out exactly how much interest you’ll be paying

When you get the loan terms from a lender, make sure you know exactly how much it’ll cost you. You’ll need to know how much you’re paying each week or each month, and how long it’ll take you to pay back the loan. Calculate how much that all adds up to and decide whether it’s worth it. So if you’re borrowing €300 over 3 months, paying back €151 per month, you’ll end up paying €453 in total – that’s over €150 in interest fees.

Make sure you’re aware of all the terms, including any hidden costs or penalty charges

You may be fine with making the interest repayments, but there may be other fees you have to pay. How much will it cost you if you miss a payment, for example? Are there additional administration or setup fees, or charges each time they send you a letter? Remember to take all of these into consideration. Those fees can add up very fast if you’re not careful.

Create a personal spending plan and stick to it

Before you take out any loan, be absolutely certain you’re going to be able to pay it back on time. Make a detailed weekly spending plan that includes your loan repayments, plus all your household bills, rent, food, clothes, travel expenses, and other necessities. Make sure you don’t forget anything, and allow yourself a little spare money for unforeseen expenses.

Then you have to stick to the plan. If you didn’t budget for that shirt, that night out, or that new videogame, you have to say no to yourself until the loan is paid back.

Repay your loan early if you can

If you repay your loan early you will probably save yourself a lot of money. Talk to your lender about early repayment options, and if you have some spare cash, pay your loan off before buying yourself treats.

Talk to a debt counselor or financial advisor

Short term loans are not a long-term solution to financial problems. If you’re having serious financial issues, seek professional advice. They may be able to help by reducing or freezing interest payments on existing loans, or helping you manage your finances better.

If you’re unsure whether a short term loan is right for you, consult a professional advisor before committing yourself to anything.