When you need cash right away, short-term loans can be a great solution; the downside is they often come with high interest rates. Refer to our simple guide to weigh the pros and cons and decide if short-term loans are right for you.
1. CREDIT CARD CASH ADVANCE
Most cards allow you to borrow money at the ATM, but at a higher rate than your purchases.
- Who can get it: Anyone with a credit card that offers cash advances
- Cost: Interest rates range from 14 percent to 25 percent at banks, a little less at credit unions. There’s no grace period, so the meter starts running when you take out the cash. Plus, you’ll pay a fee upwards of 3 percent of the amount you borrow.
- Risk level: MEDIUM. If you don’t repay the loan quickly, high interest can snowball. Issuers can raise the interest rate and charge a penalty if you pay late.
- Best choice when: You need money immediately and can pay it back quickly.
- Get started: Compare cash advance rates at lowcards.com.
2. UNSECURED PERSONAL LOAN
Many banks and credit unions offer fixed-rate loans that range from $500 to $50,000.
- Who can get it: Generally, your credit needs to be at least “fair” (a score of 620 to 659).
- Cost: Unsecured loans aren’t backed by collateral (like a house), so the interest rates are higher than secured loans but lower than most credit cards. Alliant Credit Union recently offered an 11.9 percent annual percentage rate (APR) to users with “good” credit.
- Risk level: MEDIUM. Late or no payments will raise your interest rate and put your credit rating on the line.
- Best choice when: You want to pay off higher- or variable-interest debt for a lower, fixed-rate payment.
- Get started: Credit unions tend to offer lower rates than banks. Look locally or on lendingtree.com.
3. SHORT-TERM ONLINE LOAN
Billfloat.com offers small loans (up to $1,000; $225 for first-time borrowers) to cover bills for 30 days.
- Who can get it: Anyone with a steady history of paying bills. You don’t need a good credit score.
- Cost: For a $300 bill payment, you will pay 3 percent interest per month, or 36 percent per year. If you pay on time, the cost is $9 in interest plus a $15 fee. If you’re late, tack on $10.
- Risk level: MEDIUM. If you fall behind on payments, you will incur late fees. The high interest rate could put you back in the hole again, in addition to hurting your credit rating.
- Best choice when: You need to cover a bill immediately and you know you can pay it back with your next paycheck.
- Get started: Visit billfloat.com to get help within 24 hours.