Have you ever taken out a cash loan? It can be a very smart financing solution for people who need money quickly and without much faff, but just like there are advantages to this type of lending, there are also some drawbacks to consider. Keep reading to find out everything you need to know about cash loans - what are they? How do they work? When would a cash loan come in handy?
What Type of Loan Is It?
Like the name suggests, cash loans are personal, unsecured loans you receive in cash. Their unsecured quality means that you do not need to offer collateral in order to secure the loan. Instead, the lender will typically carry out some checks during the assessment of your application, in order to determine whether or not you are eligible to borrow money. These include credit checks, ID checks, affordability checks, employment checks, etc.
Since the loan is offered in cash, the amounts are not usually very high, and they are not given out for long periods of time. This makes this type of payday loan unsuitable for large purchases that you wish to pay off over a longer period. If, however, you need a relatively small amount of money quickly, instant cash loans can be your ideal solution.
As far as amounts go, you can expect anywhere from £100 to £5000, but you will find that most companies offer around £1000 to £2000. Knowing this, it follows logically that repayment terms will vary from around 1 month (for very small loans) to even 36 months, if you are accepted for a loan on the higher end of the scale.
What Are The Advantages?
You get the cash instantly
Clearly, the biggest advantage with fast cash loans is that you receive the money almost instantly. The application process is not at all lengthy, you can usually get pre-approved very quickly, and you can leave with the money in hand, on the very same day you apply. If you're ever in an emergency situation where you need some money, this might be your best bet. Traditional loans can take days to process, and then you have to wait another few days for the money to reach your account. But with instant cash loans, such as payday loans or doorstep loans, you do not encounter this issue.
You can spend the money however you want
The other thing to take into consideration is the fact that, with an instant cash loan, you can go ahead and spend it on whatever you want, because you have complete liberty and flexibility. You don't need to account for the way you wish to spend your loan, so there is no need for justification - purchasing something, or spending it on personal things, etc. You get the money, preferably in cash, and you can go out and spend it immediately. Especially if you have a personal debt to pay off or you want to shop for something urgent, this feature can be invaluable.
What Are The Problems?
You can only borrow relatively small amounts
Of course, the issue that is most glaring is the small amount of money you receive. While a small cash loan can cover some types of expenses, they are not suitable for major purchases or long-term expenses you may have. A better option might be to take on a secured loan, or even a different type of unsecured loan, that offers a bigger pay-out. Otherwise, you are limited by the amounts you are offered with this arrangement and there is nothing much you can do to up the limit.
The repayment term is very short
Another drawback is the repayment term that comes with small loans like this. You will most likely be required to repay a small cash loan within a relatively short period of time. For example, a £100 cash loan would only grant you a one-month repayment term, while a £500 or £1000 might only come with a 3 to 6 month repayment term. Depending on your income, and taking interest into consideration, that may be difficult to afford and may create more issues in the long run.
Who Should Go For A Cash Loan?
Knowing all the details, good and bad, is a cash loan suitable for everyone? And if not, then who should get a cash loan, and what can one use it for? Let's take a look at the circumstances.
|You SHOULD go for a cash loan if:|
|You only need a small amount of money|
|You need money fast|
|You can afford to repay it quickly|
|You SHOULDN'T go for a cash loan if:|
|You can't afford the repayment instalments|
|You can wait for more convenient loan options|
|You need more than £2000|
All in all, cash loans can be an attractive option for people from all walks of life if they need to get money quickly,. The rising number of young people asking for financial advice from places like the Money Charity because of the increase in rent prices and decrease in affordability of everyday expenses certainly suggests that more and more people are struggling to make ends meet. An instant cash loan can be the quick fix they are looking for, but before you commit to a financing opportunity like this, you have to take all of its aspect into consideration.
While cash loans to your door are fast and convenient, as they are easy to get and require minimal effort, you can't get a lot of money, and you will be required to repay it fairly quickly. You have to determine whether or not this is the right option for you and if it covers all of your financial needs.