Media outlets are filled with stories cautioning viewers to control their spending, and avoid going into debt. Yet, it seems that more folks than ever before owe money to someone. According to a 2015 report on American Debt from the Pew Charitable Trusts, 8 out of every 10 Americans hold some form of debt.

Going into Debt has its Benefits

With so many individuals and businesses borrowing money to finance important purchases, one has to wonder, if going into debt is really that bad? After all, without debt, it would be impossible for most of us to afford to pay for a car, a home, or higher education. Going into debt makes it possible for most households to acquire wealth and build their net worth.

Even smaller expenses, such as vehicle repairs, hospital bills from an unexpected emergency, or a once in a lifetime trip would be difficult to afford solely by saving the money and paying for everything up front. Debt makes it possible to pay for the things that we want, and need, over time. While we are often cautioned about going into debt, the truth of the matter is that most of us would have a very bleak, dreary existence without it.

Times When Short Term Debt is a Good Option

When we hear the term “good debt,” it’s common to think of home and auto loans, but there are times when a short term loan can also be a good form of debt. For example, instead of charging an emergency expense to a credit card, you may be better off looking for a fast installment loan that features a reasonable monthly payment.

This is especially true if you need to borrow to meet a true need. Sometimes, bills can be unexpectedly high, or, you might experience an unexpected loss of income, such as during an extended illness. In times like this, it can be difficult to come up with the money to buy groceries or prevent the utilities from being turned off.

If you need to come up with the money for a rental deposit, to make a house payment, or pay the rent without money on hand, a short term loan is a good option if it allows you to keep a roof over your head. While you should look for ways to reduce your expenses, and increase your monthly income going forward, a short term loan can provide you with much needed breathing room until you can get back on your feet and put your financial house in order.

Short Term Loans are Good Options Even if You Aren’t in the Middle of a Financial Crisis

Of course, you don’t have to be experiencing a financial emergency in order to benefit from a short term loan. It can be a good option if you’re planning a vacation, making a special purchase, such as an engagement ring or paying for wedding expenses, or want it for a more useful purpose, such as short term rental financing or something similar.

For example, if you were planning on paying for these expenses with a credit card that features hidden charges, a short term loan will likely save you money over the repayment period. A short term loan can also be a better option if it allows you to finance an expense without having to put up an asset as collateral, as is common in other types of personal loans.

Focus on Repayment Terms When Borrowing

When borrowing money, a key point to remember is to avoid borrowing more than you can comfortably afford to repay. Knowing your exact repayment schedule can help you monitor this aspect of borrowing.

When going into debt, focus on the repayment terms to ensure that the debt that you acquire is affordable to your budget and is truly the best option for your situation.


Author: Katie

Katie is a finance specialist with one of the biggest firms in London. From savings to investments, there’s nothing she can’t advise on and she’s here to help spread the word and help you on your way to financial freedom.

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