Question

What are the advantages and disadvantages of using short-term debt as a source of financing

Answer 1

Advantages of short term debt as a source of financing:-

i) Need to pay less interest

ii) Easily approved if they are small

iii) It can help to improve personal credit score.

Disadvantages of short term debt as a source of financing:-

i) It can have a negatibe impact on the credit score if not paid on time.

ii) It involves you in a cycle of borrowing. This means that you will keep borrowing money every now and then for making payments.

iii) The monthly payments to be made are larger in size due to shorter time period which increases the stress on our daily life.