Instant Loans, Just The Ticket When Things Are Tight
Instant loans, what a terrific creation they are
if you’re in need of quick cash.
In years gone by, applying for loans was a lengthy process and a commitment not undertaken for anything less than a major purchase, such as a car or home improvements.
However, in modern times, the face of loans has changed dramatically with a decision often available straight away for smaller amounts and with much of the population relying on loans much more heavily in order to manage their finances.
Below are a number of types of instant loans available, with the benefits and pitfalls for each.
Instant Loans on Payday
These are some of the most rapidly available loans in the market, with some firms claiming to be able to credit the cash within 30 minutes of application. The process is often automated, with online acceptance for many and lending criteria is one of the most generous in financial services.
Payday loans are not designed for long-term borrowing – they are exactly what they say – designed to last the borrower through to payday.
As many households face challenging economic times, payday loans are the fastest increasing type of credit, with more and more people needing to dip into the red to pay for everyday items.
Whilst these types of loans truly are the closest thing you can get to instant loans and they are a godsend for those that have run out of money and need some cash urgently, they come at a price.
The APR on payday loans is far higher than on regular loans, usually in excess of 1200%, compared to around 7-8% from one of the mainstream lenders.
However, whilst this may sound impossible to repay, in real terms, because the amount borrowed is so small, the actual monetary value of interest is relatively trivial – usually around £25 for a £100 loan.
Doorstep Loans
Another type of instant loan and an alternative way of borrowing is from doorstep lenders, a more traditional way of obtaining credit which is open to everyone, regardless of employment status.
Most loans are relatively small to start with, around £100-300 is typical, with terms usually available between 30 and 52 weeks. Repayments can generally be made weekly, fortnightly or monthly and the lender will send a local representative to collect the money.
The advantages of doorstep lenders is that very often there is flexibility within the loan, with most allowing overpayments and early settlements without penalty. Those who have a good payment record can sometimes also negotiate to skip a week, for those times when money is particularly tight.
Approval rates for doorstep lenders is also much higher than a high street loan, with applicants with a poor credit history as well as the unemployed usually able to obtain funds.
The reason for the leniency in agreeing loans is reflected in the interest rates which are much higher. The APR for a doorstep loan usually starts at around 150% for short term loans and increases to over 250% for longer term agreements. However, it is usually possible to pay less interest by overpaying and settling a loan significantly sooner than due.
Fast Cash Loans
Whilst payday loans and doorstep lending are both helpful for those with a less than perfect history, recipients will pay more in interest charges.
For applicants with a cleaner financial record, it can be possible to obtain a fast cash loan from one of many high street lenders, such as First Direct or Lloyds, which offer a far more competitive APR and are more suitable for those looking to borrow for longer.
The downside is that many banks will not consider a fast cash loan unless you are already a customer.
Alternatives To Instant Loans
For those needing credit, rather than taking out a loan, it may be worth considering for one of the new breed of credit cards, such as the Virgin credit card. An option to instant loans would be using a credit card which means you only pay interest on the funds used and provides far greater control over repayments.
Read Wikipedia’s description of instant loans
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