Short Term Loans and Alternatives

ID-10097811Are you having trouble paying all of you monthly expenses? Are you considering obtaining a loan to help you out of your debt? Before you apply for a short-term loan to provide a quick fix to your immediate financial troubles, it is important that you first look at the long-term effect of this type of loan and what, if any, alternatives you have.

A short-term loan may seem like the perfect solution to your current financial situation, but the end result could put you in more financial trouble than you were before. Here is a look at why you may want to avoid a short-term loan and what your alternatives are.

Why Avoid Short-Term Loans

The problem with alternative loans, such as Payday or Logbook loans, are the costs associated with taking on these types of loans. They have exorbitant fees and charge an extremely high rate of interest. In many cases you may end up paying back a substantially higher amount than you borrowed in the first place.

These loans also have very loose approval criteria and may provide borrowers with more than they can afford to repay. This then starts off the negative spiral of debt and bad credit. Many of these loans require a direct debit for repayments where the money is taken directly out of your account where your pay is deposited. This can open up a whole can of worms as they get first dibs on your pay check leaving you less to live off of until the debt is repaid.

It only takes a few minutes to research the pros and cons of short-term loans online to see the numerous negative stories surrounding them. If you are caught up in a financial crisis, review the following genuine options for those who aren’t sure where to get help.

Negotiate with Lenders and Creditors

If you have fallen behind on some, or all, of your bills, the first step is to contact each lender or creditor you owe money. Explain your situation and try to negotiate a payment plan with them. They may be willing to agree to smaller payments each month or fortnight that will make it easier for you to afford. Many utilities companies, for example, have a hardship department that works with people who have fallen behind on their bills to create a workable payment plan that can avoid having their utilities shut-off.

If your lenders or creditors are not cooperative, be sure to follow up your conversation with a letter that clearly explains your current financial situation and your proposed payment plan. The creditor must respond to your hardship variance request within 21 days.

Governmental & Non-Profit Loan Options

If you are low-income, you may be eligible for a no or low-interest loan from the government. Below are two common loan options for families going through financial difficulties, read about other potential borrowing or benefit options here.

• No Interest Loan Scheme. The No Interest Loan Scheme, or NILS loans are available to all low-income people. You can borrow up to $1,200 and can repay this amount slowly over the course of 12 or 18 months.

• StepUp. The StepUp loans are also for low-income people and are unsecured, low-interest loans. You can borrow between $800 and $3,000 and they will work with you to set up regular payments that you can afford.


If you are experiencing an emergency situation, there are several charities located throughout Australia that can help. You can contact a local church or the Salvation Army to see what help is available. Oftentimes, these charities will help with some of your expenses and do not require you to repay the money.

If you are having financial problems, the best option is to see a financial counsellor with experience in handling debt problems. He/she may be able to help you work with your lenders or creditor to negotiate different repayments terms. They can also help you create a workable budget and determine what type of financing, if any, would be best for you.

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