What Are Instant Loans? All You Need to Know About Instant Loans

If you have poor credit and need immediate cash, an instant loan may sound appealing. You can get fast cash to pay unexpected costs like a medical bill or car repair within a few days. Instant loans can be costly and put your finances at risk.

What is an instant loan?

A short-term loan, also known as an instant loan, can be used for little money. It comes with high-interest rates along with fees. There are many types of instant loans. Some go by different names. These instant loans are:

  • Payday loans. A payday loan, also known as a cash advance or cash advance, doesn’t need collateral and gives you cash the same day. The loan must be repaid by the due date, plus any high-interest fees, within your next pay period.
  • Pawnshop loans. A secured loan is a pawnshop loan or pawn loan. As collateral, the pawnshop will hold an item that you own. You receive a loan equal to the collateral’s amount in exchange for the item. The pawn shop will take possession of the item if you fail to pay the loan on the due date.
  • Car title loan. This loan, also known as a pink slip loan, is secured by the vehicle’s title. While you can still drive your car, you will need to repay the loan entirely, including the interest, by the due date. You risk losing your vehicle if you fail to repay the loan on time.

No matter what type of instant loan you are considering, the lender calls it: an instant loan is high-risk borrowing.

What is the process of instant loans?

According to the Pew Charitable Trusts, payday loans are a popular option for an instant loan. Twelve million Americans use them each year. The average instant loan amount is $500 or less. The interest on these loans can be extremely high. It is sometimes expressed as a percentage of the amount borrowed or as a dollar amount. A $100 fee is an example of this. Fees can vary from one state to the next, with each state having its fees limits.

Here’s how a payday loan works if you are considering this borrowing option:

  1. Send an instant loan request. A credit check is not required for payday loans. You will need to give your personal information and show proof of income (e.g., a pay stub), as well as a bank account. Depending on your location, you can find a lender online (or in-person) at a cash advance branch.
  2. Send a postdated or ACH authorization. The lender will need to receive a postdated, stamped check with the due date. The amount of the statement, depending on your location you will include interest and the amount borrowed. A lender may require authorization via ACH (Automated Clearing House) if you are completing the instant loan application online.
  3. Receive your loan funds. The lender will pay the total amount of the loan (minus any fees) in a cash lump sum. If you have access to your account, the lender may deposit the online instant loan directly into your account.
  4. Pay the loan on the due date. A payday loan repayment term is approximately two weeks or until you get your next paycheck. This depends on the terms of the loan agreement. You’ll be responsible for repaying the loan when it is due.

Payday lenders may offer a rollover option to defer repayment until you can repay the loan. Rollovers are not available in all states and may incur additional fees.

Is it a good idea to get instant loans?

Instant loans are not a good idea in most cases and should be avoided. , the average payday loan interest rate for the first two weeks is 391 percent. It is easy to forget how much fees you are paying.

If you get $400 today, it is possible to pay an additional $60 fee. Don’t mistakenly believe that the rollover option offered by some lenders is a lifeline.

Similar to the above example, a rollover for a two-week payment extension could cost $60 in addition to the $460 principal and fees already owed. You’ll now have to pay $120 to borrow $400 for four weeks.

The Consumer Financial Protection Bureau reports that more than 80 percent of borrowers will roll over their payday loans within 14 days. It might prove challenging to repay the loan if your budget is tight. You may also be tempted to roll over multiple loans until fees go up.

Debt collectors may report your loan to credit bureaus if it goes into default. Your credit rating will be affected. To recover the funds, debt collectors may also sue you. Your wages could be garnished if the court rules in your favor.

Alternatives to Instant Loans

Consider all options before you decide to take out an instant loan. These are some ideas that you should first explore:

  • Talk to your servicer or creditor about a payment plan. Talk to your servicer or creditor about your financial situation. They may be able to offer reduced payment plans.
  • Bad credit personal loan This option has higher interest rates than payday loans, but they are still significantly lower than the payday loan fees. Personal loans typically have a more extended repayment period.
  • Close friends and family. Ask close friends and family members if they are willing to lend you a loan for the short term. 
  • Talk to a nonprofit credit counselor. Talk to a nonprofit credit counseling agency like the National Foundation for Credit Counseling about your options for long-term debt relief. You can get help with your debt management plan to be ready for any unexpected expenses.
Alabama
Alaska
Arizona
Colorado
California
Delaware
Columbia
Florida
Indiana
Georgia