Cash loans are easily accessible and convenient, which is why they have grown so popular in recent years. Many people use cash loans to solve short-term cash flow issues, or to tide them over until their next payday. However, due to their flexibility you can use the funds you borrow for any purpose.
Despite their many benefits, there are also a number of disadvantages associated with these types of loans. So, in order to help you make that all-important decision we've put together the main pros and cons of cash loans, as well as the costs and benefits of alternative borrowing methods. For those wondering 'when would a cash loan come in handy?' read on to learn about some of their advantages.
The pro's of cash loans
'Cash loan' is the term used to describe money borrowed from a lender or bank, which is then sent directly to your bank account or given to you in person in cash. This type of loan differs from other loan types such as mortgages, because the money is sent straight to you rather than being held with the bank. There are a variety of cash loans available on the market including:
- Payday loans
- Short-term loans
- Unsecured loans
The type of loan you go for will largely depend on your individual circumstances, however, each borrowing method has it's costs and benefits to consider. Below, are some of the advantages of cash loans that could benefit you if you opt for this financial solution.
If you're hit with an unexpected bill or you need cash fast, a cash loan could be the solution you need to get you through short-term financial struggles. This is one of the main benefits of these types of loans.
There are a multitude of lenders on the market and the majority will send the loan funds to your bank account within hours or minutes of your application being accepted. This is usually significantly faster than making a loan application with a high-street bank, where you may have to wait a few days or weeks to receive the money you want to borrow.
Another advantage of cash loans is that they're convenient. Gone are the days of visiting a brick-and-mortar bank with your lengthy application forms at the ready, only for them to tell you after a few days that your application was unsuccessful.
These days you can apply online without having to visit a standalone branch, and you can make an application at any time of the day or night. This is a more convenient option as you can apply whenever you want within the comfort of your own home, or wherever you have internet access.
If you're going through financial difficulties, you may not want to worry your family and friends until you're back on your feet. Alternatively, you may prefer to keep financial matters private, and with a cash loan you can do just that. By opting for a cash loan, you can apply for funds privately within the comfort of your own home, so that no one else needs to get involved.
The con's of cash loans
Cash loans are not without their risks and pitfalls. Below, we've listed some of the main costs associated with this method of borrowing.
Cash loans are notorious for their high interest rates, and can often reach at least 300% depending on the lender. It's because of these costs that makes it so easy to fall into a cash or payday loan trap. This occurs when borrowers continually can't keep up with repayments, they then extend their loan repayment date and build up high levels of interest.
Deception by lenders
Some lenders may seem like they're being transparent with their costs, and they may even make it seem like it's not that expensive to borrow from them. However, in reality, more deceptive cash loan lenders use these tactics to lull customers into a false sense of security and cause people to enter confusing and binding financial contracts.
Easier to build up high levels of debt
It's important to remember that cash loans are one of the most expensive types of loans on the market, and if you can't keep up with your payments you could leave yourself in an extremely difficult situation in the long-run.
Would an alternative be better?
Deciding on whether or not to apply for a cash loan will largely depend on your individual situation. It's important to calculate whether you'd be able to keep up your current lifestyle, whilst paying loan repayments and interest. This will give you a better idea as to whether you can afford this method of borrowing.
Alternatives such as credit cards, long-term loans and secured loans are usually cheaper than cash loans. However, these are usually harder to obtain and you risk harming your credit score if your applications are denied.
How to Avoid the Potential Pitfalls of Cash Loans
If you think that this is the method of borrowing for you, it's important to know how to avoid the potential pitfalls of cash loans before applying for a cash loan. Read on to learn how to do just that.
Don't get a cash loan
The only way to eliminate the risks associated with cash loans is by avoiding them completely. They may seem easy and convenient at first, however, when used irresponsibly they can worsen your financial situation significantly.
If you're strapped for cash and need extra funds, it's better to go for cheaper methods of borrowing or try budgeting in order to reduce your level of debt.
Ask for others' opinions
If in doubt, it's always a good idea to get an impartial third party to weigh in on your situation. You feel that you need the extra funds, however, others may suggest a way that you can afford your desired purchase without the need for a loan.
Save, save, save
If you're getting a loan to cover additional debts, this is likely going to worsen your financial situation in the long run rather than saving it. Learning to save and cut back on spending will help you to raise funds, therefore with time, you won't need a cash loan at all.