Instant cash loans refer to loans you can apply for and get within a short period of time. They are usually short-term and unsecured loans that can be used for emergency expenses. One of the reasons they can be popular loan products is because they’re available online and thus, can be easily accessible.
In this article, we are going to discuss what instant cash loans are as well as their pros and cons. We hope this helps you determine whether this is the right choice for you and your particular financial situation.
How Do Instant Cash Loans Work?
There are several lenders where you can get instant cash loans to get your money quickly and without hassle. While the name suggests instantly getting money, the process isn’t quite that simple. However, the approval process takes very little time. Depending on the lender you choose, you can have money in your bank account in a matter of a few hours or days.
Some lenders even let you apply free of charge. Jacaranda Finance, for example, lets you submit an application and receive a quick answer without the need to submit any initial fees. That being said, it’s important to note that these loans should be reserved for emergencies.
Using them as a long-term solution, or if not managed properly, can lead to further debt due to the relatively high interest rates or fees on instant loans in proportion to the amount of money borrowed and the length of the borrowing period. The Jacaranda website quotes a comparison interest rate of 12.05% at the time of writing, however in some cases the interest rate could exceed 30%.
This compares to lower interest rates found on other types of debt, such as mortgages and secured loans. However, those borrowing options simply aren’t available to a good portion of the population due to factors such as credit history. They are also inflexible products in comparison. Many mortgages don’t allow early repayments, and secured loans can sometimes take weeks of paperwork to arrange with a bank.
Advantages of Instant Cash Loans
Instant cash loans are popular amongst some borrowers because of the many advantages they provide.
The main advantage of instant cash loans is the “instant” part. While the speed of processing a loan depends on the lender, it generally doesn’t take very long. Some lenders even get back to you within an hour, or otherwise only take a day or two.
Because instant cash loans are typically smaller loan amounts, they’re usually unsecured. This means that you don’t have to put up collateral, such as your car or house, in the event that you don’t pay your loan. If you’re unable to make your loan repayments, you might risk losing your collateral. However, with unsecured loans, this risk can be eliminated.
No hard credit check
Generally, unlike other types of loans, there are no hard credit checks. Soft checks may be performed but lenders look at your ability to pay back the money.
Traditional loans can come with eligibility requirements that can prevent you from applying if you’re not a ‘good’ candidate. Generally, instant cash loans come with fewer requirements and are even extended to those with poor credit.
Disadvantages of instant cash loans
All loans have some cons, and this is no different from instant cash loans.
Risk of Debt Trap
As previously mentioned, these loans are ideal for emergencies but can be risky. This can put you into further debt if you can’t pay back the loan on time.
Falling into a debt trap is more common for unsecured instant loans than for secured loans because of their nature.
- Their accessibility and availability means that borrowers may take out the loan for a less urgent situation – introducing them to debt when debt wasn’t the only option.
- Their higher interest rates means that the value of debt will increase faster over time if the borrower needs to continue taking out new instant loans to pay off the old loan plus interest. This can lead to a growing debt burden.
- Their short-term nature could give borrowers the reassurance that, while not ideal, an instant loan will only be a short-term fix and won’t become necessary every month. After all, the loan has a formal repayment plan which could be as short as 28 days. However, circumstances can change and life turmoil can result in those obligations becoming onerous and in can become difficult to get out of debt.
Shorter Repayment Period
Because these loans are generally smaller, they also have shorter repayment periods. While this means that you won’t be in debt for a long period (assuming that you make the scheduled repayment), even borrowing for a short period can be challenging if you’re living paycheck to paycheck.
As with all loans, instant loans have their advantages and disadvantages. It’s up to you to determine whether the pros outweigh the cons and how urgent your needs are.