Almost all Americans interact daily with the credit system. Whether it was your first house, your first car, or possibly your first credit card or business loan, all of us have been a part of this system and continue to use it every day.
If you need a larger sum of money, depending on your needs, a short-term loan or a long-term loan may be preferable. Let’s examine the pros and cons of a traditional loan versus that of a short-term or payday loan.
Why Are Interest Rates Important?
In the finance world, if you’re a lender looking to make money from a loan, you usually want someone committed long term. The longer the term commitment, the more money is at stake.
The reason behind this is interest. Interest plays a huge factor in the terms of any loan. The higher the interest rate on any long-term loan, the more money you will pay back over the entire life of that loan.
If you are going to borrow long term, make sure the interest rate is very low. A reasonable interest rate depends on the ‘market’ rate, however, usually, rates are competitive, so if you’re in need of a long-term loan you really need to shop around for the best interest rate.
The interest rate you pay can depend on how much you borrow, how long the loan is for, and your credit score.
Credit scores greatly impact how we borrow money. If you don’t have a great credit score, you may be left with a higher interest rate to pay, even for a long-term loan. Without a good interest rate on a long-term loan, you’ll pay a fortune.
More often than not, traditional lending companies will not offer a loan to someone with a poor credit rating. You will need to look for a short-term option or a type of loan that allows you to use your property as collateral.
Short Term & Payday Loans in Idaho
So what are your other options if you aren’t buying a home, or a car, or doing a major upgrade to your house? You aren’t making a large purchase, but say, you need quick cash for a car repair you can’t afford or you have a family emergency expense. A payday loan or short-term loan is an option.
Usually, these loans have high-interest rates, but the point of them is to pay them off very quickly, thus, the loan earns very little interest.
One issue with short-term loans, besides their interest rate, is the fact that many people do not pay them off within time. This can result in late fees that really increase the amount you pay.
Can I Use My Car as Collateral for a Loan?
If you own a vehicle outright, you have an excellent choice for a short-term loan in Boise and Nampa– the car title loan. A car title loan uses your vehicle as collateral so there’s less risk for the lender. This results in a lower interest rate, and you’ll pay back less on your short-term loan.
With a car title loan in Boise, you’ll be able to borrow more than were you to take out a payday loan or unsecured short-term loan. You won’t be paying back a loan for years on end, so you won’t rack up a massive amount of interest. A car title loan is a good option for a short-term loan.
Car title loans have an additional benefit for cash-strapped individuals – many car title loan companies in Boise don’t require a good credit score. In fact, at the best car title loan providers in Boise, no credit check is performed at all, as your car is the collateral for the loan. These Idaho car title loan providers know that your credit score isn’t a great indication of whether you’re able to repay a loan now, as a credit score is about your financial situation in the past.
If you are careful, shop around and carefully weigh your options, and pros and cons you can figure out if a traditional, longer-term loan is right for you, or a short, high-interest payday loan would fit. A car title loan is a good balance of the two, as you’re using the collateral value of your vehicle to reduce the interest rate you pay.
Everyone has different needs financially, so consider all of your options before taking out a loan. For people who own their own car, a car title loan is often the best short-term option.