6 month loans
There are many reasons why you may decide to take out a personal loan. For example, perhaps you need some extra money to pay for home improvements, car repairs, a replacement kitchen appliance or an unexpected emergency.
When looking for a personal loan, most people focus on the amount of money they need to borrow. But it’s also important to consider how much time you realistically need to pay back your loan.
It can be tempting to opt for a loan with a short repayment length, for example a 6 month loan. Whatever your reasons for borrowing money, you would then like to repay the loan as soon as you can.
But is a 6 month loan a good idea?
Advantages and disadvantages of 6 month loans
The main advantage of a 6 month loan is that if you can meet the repayments, you will only have the loan for 6 months.
However, before jumping in, just be aware of the disadvantages:
- Taking out a 6 month loan does not give you very long to sort out whatever financial situation you needed the loan for in the first place. You need to be very sure that you will be able to afford to make all the repayments on your 6 month loan within that brief time frame.
- If you are unable to make any of the repayments on your 6 month loan this could adversely impact your credit score, making it more difficult to get credit in future.
- If you are late with any of the repayments on your 6 month loan, some lenders may charge you late payment fees, increasing the cost of your loan.
Are there alternatives to 6 month loans?
Yes. It may be a better option to consider a personal loan with a longer repayment period, for example 18 months – 24 months.
There are three good reasons for doing this:
- You would not be under pressure to repay the loan quickly as you would be with a 6 month loan. This is a particularly important consideration when your overall finances may not be in a strong position.
- Your repayments would be smaller, because they are spread over a longer period than they would be for a 6 month loan.
- If you are able to find a flexible personal loan from a reputable lender, it may be possible to repay your loan earlier than planned without having to pay any additional fees for doing so. This could give you the best of both worlds.
So before you sign up for a 6 month loan, do bear in mind the potential pitfalls, and consider whether it is worth looking around at other options that may be a better fit for your current financial circumstances.