Minimum Payment is a Trap, How to Pay off Your Short Term Loans in Full

Short term loans are great for getting cash when you’re stuck in a bad situation, when you have bills to pay and payday is still days away. These are also great choices for people who can’t afford bigger, long term loans. They are short and smaller so that you can repay them quickly and save on interest payments. A big mistake you may be tempted to make is to not repay these loans in full and to make minimum payments instead. Here’s why you shouldn’t do it and how you can always pay back in full.

How Making Minimum Payments on Short Term Loans Costs You

Sometimes it seems like the only option. You only have a little bit of money in your account, or you have an expense you think is more important, so you make just the minimum payment on short term loans. This completely defeats the purpose of short term loans, which is to pay less in interest by repaying soon. When you draw out those payments it costs you in interest. Instead of paying once, you pay over and over again. You’ll save a lot of money by avoiding minimum payments and simply repaying your loans as soon as they are due, in full.

Minimum Payments on Short Term Loans Damage Your Credit

Not only does making minimum payments only cost you way more money than you need to spend on short term loans, it can also damage your credit score. Credit reporting agencies look carefully at how you use debt, and only ever repaying the minimum amount and carrying debt will lower your score without question. You need to repay as much as you can and as soon as you can in order to maintain a good credits score that will serve you well in the future.

To Repay Short Term Loans on Time, Cut Back in Other Areas

So you know that you need to make repayments on short term loans in full, not as minimum payments, but how do you do that when you’re short on cash? The secret is to prioritize your expenses. It may seem like you really need to use the cash you have to upgrade your used car, but save that expense until you’ve repaid your debt. Make sacrifices in other areas too, like cutting back on cable bills or cell phone service until you are able to get out of debt again. Budgeting, prioritizing, and cutting back will help you repay short term loans in a smart way, and you won’t regret it.

Work with Your Short Term Loans Lenders

Another strategy you can use is to work with the lender that offers you short term loans. If you have been a good customer in the past, your lender may be willing to cut you some slack and give you another week or payday period to repay your loan without penalties. It may not work, but it never hurts to ask. You may be surprised at what you can get when you do.

Minimum Payment is a Trap, How to Pay off Your Short Term Loans in Full By Heather Wilson - 9/7/17