Life is full of surprises and the pattern of events in our lives is quite unpredictable. We may be enjoying ourselves and feeling like things are going really well for us and then out of nowhere, we get hit by a surprise we didn’t anticipate. When we least expect it, we can go from self-sufficiency to having an issue that requires us to seek external financial help. And we may have had some savings at the time of getting the unfortunate event but we may end up having to look for more money as the savings may not suffice.
Quick loans can be the drop of cold water under the extreme heat of the sun. They can help us gather up money fast to deal with the problem before it gets worse. They have a reputation for being fast in approving and releasing funds, and convenient in the sense that you don’t have to commute to get them. You can apply for them while seated on your couch and sometimes have the money from the loan in your bank account in 1 hour. your account within a few minutes to hours later. Nonetheless, they may have unusually inflated interest rates that can easily make a borrower lose a lot of money while repaying them, especially due to their short repayment periods.
Let’s explore quick loans in-depth and see why they are famous in the borrowing world as well as why you should be careful when working with them and plan carefully to manage the risks that the loans present.
What Quick Loans Are All About
Quick loans are a recently developed loan product that's slowly overtaking traditional loans from the bank. Quick loans offer a much faster financial solution to someone who needs a loan and they’ve become very reliable in instances where a borrower wants to pay off a time-limited expense like an urgent medical expense.
These loans have been created by peers for other fellow peers and also by other financial companies that aren’t affiliated with banks. Although banks are also slowly adopting the new lending technique, most borrowers prefer to work with lenders who aren’t from the bank.
Any borrower can benefit from a quick loan without even having to leave their home. With an internet connection and a smartphone device, you can simply send your application online and get the money on the same device on the same application day.
Even as a first-time borrower, you should be able to go from sending your application to receiving your preferred loan amount within several minutes of applying. In the worst-case scenario where there are a few issues with your application that you need to sort out with the lender, the money can be gotten by the next business day.
The ease of the loan application, quick decision-making and approval by the lender, and easy-to-meet requirements, among other advantages, have made quick loans become the top sources in a borrower’s list of urgent financing options.
The Method of Operation of Fast Loans
The way quick cash loans operate is as easy as it gets. Lenders of these loans have done their best to simplify the whole process to accommodate a borrower who wants quick cash that can’t delay.
To begin with, borrowers are expected to send their application online through the lender’s website or through lending network websites that link borrowers up with lenders. The application process is also very intuitive and requires little but very important information about the borrower.
The application helps the lender know the borrower’s personal and financial details that they use to determine if the borrower is creditworthy. Some of the personal details you’re required to provide are your name, home address and proof of address, identity card details, email address, and your phone number.
As for financial information, you’ll be expected to disclose your income source, your bank account details, and your financial transactions in the last few months. Some lenders may also ask for a list of your monthly expenses with proof, so they can see how much you spend every month on regular expenses. This will help them know how much of your income you can direct towards loan repayment and thus determine the actual loan amount they’ll offer you that they know you’ll comfortably be able to pay back.
Repaying your loan
When it comes to repaying your loan, most lenders will often discuss with you the repayment date. If your lender doesn’t discuss it with you, they’ll look at the date you get your payment and set the repayment date around that date.
If you don’t repay on the due date, you’re highly likely to be penalized for that by getting additional charges on your loan. For some lenders, the penalty may be calculated through a percentage of the due loan while for others a fixed charge of about $10 every day from the missed date may apply.
Some lenders may allow you to push the payment date further ahead if you don’t have money by the time the loan repayment is due. However, you’re supposed to alert the lender way before the due date.
After letting the lender know about your inability to repay as agreed, the lender will go through various options with you and help you choose a more flexible period to repay the loan. While this seems convenient, it’s worth noting that you’ll pay some more charges for the rollover. That’s why it’s best to work within the initial agreement you and the lender had to avoid accruing further charges down the road.
Interest rates, APR, and other additional fees
Quick loans are known to have notoriously massive interest rates that may go up to 10% to 30% of the principal loan amount. Lenders argue that due to how simple and seamless they’ve made the loan process for even borrowers who have bad credit, they protect their investments through the high rates.
If you think about it, you’d see how that may be the case. Many lenders of quick payday loans barely look up the borrower’s credit score. They may perform a superficial check that will give them a rough idea of the borrower’s credit profile but this isn’t sufficient enough to affect the borrower’s ability to be approved or rejected on their loan request.
Nonetheless, there’s a small fraction of lenders who go all in with the credit checks. They’ll pull the borrower’s data from credit bureaus like Experian and FICO, which will give them a clearer understanding of the borrower’s credit records. Lenders who go this extra mile are those that heavily rely on the credit history and credit score of the borrower and may reject a loan application if the score is too low.
The good thing about lenders who check your credit score is that they won’t charge you high interest on your loan. However, they may not be reliable if you have bad credit.
The Annual Percentage Rate (the interest your lender will charge you every year on your loan) of online loans with fast approval is also relatively high going by the lender you get your loan from. The rate may hike from 300% to 1000% due to various factors.
A common additional charge placed on all loans is the origination fee which is the fee that lenders deduct from your loan for making the loan available to you.
Common Characteristics of Quick Online Loans
Quick cash loans have unique features that set them apart from other loan options available. These features include:
Short repayment terms - You’re given an average period of 7 to 30 days to pay back your loan. In some cases, the period may be longer due to different factors specific to an individual and their situation. Lenders of these loans will often let you choose the best repayment period that you’re sure you’ll manage.
Unsecured but high-interest loans - Quick loan lenders that are likely to process the loan and give you the money on the same day you apply for them, are always going to offer you unsecured loans. This means you don’t have to give up an asset you have to assure the lender their money won’t be lost. However, lenders assure themselves by charging you a higher interest rate to compensate for the lack of security provided for the loan.
Little documentation required - Most quick loans for even those who have bad credit, very little documentation will be asked. In other cases, no documentation may be needed at all. It all depends on how your lender offers their services. What the lender may ask is your income proof, your bank statements, proof of address, utility bills, and pay stubs.
Fast verification process - Lenders typically have a verification system that lets them calculate and approve or disapprove your loan fast. Many online loans have same-day processing. Immediately after you’ve submitted your application, lenders may take several minutes, and at times seconds, to get back to you with a decision on whether you’re qualified or not.
No faxing needed - Unlike the old days when a borrower would fax their application to the lender, quick loans provide a much faster way to proceed with your loan application. This means you save more time on your loan process.
Different Types of Fast Cash Loans
Fast money loans can be accessed in varying categories, namely:
1. Installment loans - Installment loans are loans that can be repaid in fixed tiny amounts after every given period until the loan is fully paid off. Here, it’s possible to get approved for a much bigger amount than $5000 if the lender establishes that you’re loan-worthy and that your income can handle larger loan repayments without affecting your standard way of living. Also, the state in which you reside may be a determining factor for the amount you stand to get from an online loan. As for the repayment, the period a lender may give you can be between a month to two years.
The interest rates and APR for installment loans are often affordable and much cheaper than for payday loans. Since you have a longer time to repay, the amount you pay per installment is quite easily affordable. Installment loans, just like payday loans are unsecured, meaning no collateral will be needed by your lender for you to receive the loan. Although, while you don’t need to surrender any of your assets in exchange for a loan, you may choose to do it if your lender approves a more reduced amount than you applied for. The collateral can stand in for the remaining amount you require to reach the amount you want from the loan. You can also choose to provide another person with good credit to stand as assurance for your loan instead of using collateral. Moreover, your bad credit won’t stop you from benefiting from installment loans as many lenders consider other critical factors apart from your credit score as they figure out if you qualify or not.
2. Payday loans - These are loans meant to be paid back on the borrower’s next payday. Here, the borrower is given a loan by the lender to act like a cash advance which they’ll be required to pay back with interest upon getting paid. This category of quick payday loans is known to have the highest interest rates and APR. But on the bright side, people with poor credit who want quick emergency loans can hugely benefit from payday loans. You can be approved for a loan amount that ranges from a hundred dollars to five thousand dollars in minutes of sending your online loan application. The repayment period for these loans is around a week to 4 weeks, and sometimes it may be longer depending on your agreement with your lender. You’re supposed to make a one-time bulk repayment for a payday loan. To be approved for such a loan, the lender has to be sure that you have a stable regular income that’s capable of clearing the loan and still have you meet your other daily needs.
3. Debt consolidation loans - These loans are normally designed to reduce a borrower’s count of debts and the total interest rates they pay for the debts. Debt consolidation loans help a borrower bring all their scattered debts into one place for better management. A borrower takes a loan and pays off all the debts they have and then they’re left with the loan they took to pay the other debts. Since this is just one loan, they get to pay a smaller amount after every given period compared to the many payments they were making for the other many loans. Debt consolidation loans that have a similarity to personal loans are much better than other debt consolidation loan forms like balance transfers for credit cards and home equity loans.
How to Apply For Quick Loans
The procedure for applying online for a quick cash loan isn’t that complicated. These are the only steps you need to work with:
Step one. Analyze your emergency and know how much money you need to get - Take your time to consider what the emergency requires you to do to put it behind you entirely. Go through each step of solving it and have a rough estimate of how much you think it’ll cost you. Add the cost of each step and get a roughly rounded figure of the needed amount.
Step two. Consider your preferred repayment option and pick the loan that suits you best - Now that you have an estimate of the money you’ll need, consider your income and how you’ll repay the loan. Based on the amount you’re willing to part with every time you get paid, ask yourself which type of quick loan will work well in your case.
Step three. Make your loan request to your lender - You should then go online to your preferred lender and fill out the application form provided for the loan type you want to get. Make sure that before you open the application form, you have all the requirements and documents laid out by the lender.
Having them ready ensures that when you begin working on the application form, you won’t need to pause first to get a document for a certain part of the form. When you’ve completed the form, you’ll submit it and await a response. It helps to apply to a couple of lenders so that your chances of getting approved are high and also for you to get the amount you want. Now going to every lender’s website and filling out their application form can be quite tedious.
A workaround for that can be to use a lending network like Cash Payday Loans that only requires a single submission from you and they automatically send the application to many lenders. It reduces the effort you’d have put in and the time you’d have spent pursuing a loan.
Step four. Know the lenders’ decisions and possibly get a few offers - Lenders will take your application and look for the requirements they’ve laid out for the loan you want to get. They’ll also look for indicators of a creditworthy person in your application. They may also do a few calculations here and there to know how much you’d be able to set aside for your loan repayment, depending on your income. Once they finish establishing your creditworthiness, you’ll either get an approval or rejection notice. There is no way to have guaranteed approval payday loans - all lenders still have to check your application to see if you qualify. If you’re approved, the notice may be accompanied by a loan offer. Several lenders may approve your request if you have the needed requirements.
Step five. Choose your offer, sign the agreement, and get your money - You’ll need to look at each offer and what it says it’ll give you as well as the terms. Doing some close comparison of the offers to spot the one that has the best terms is good practice. Once you’ve identified your ideal offer, you’ll express your interest in the offer to the lender and then they’ll have the loan agreement ready for you to sign. Again, it helps to read the entire agreement to know how you’re planning to do business with the lender. If you feel it’s fair, go ahead and sign it and return it to the lender. The money should be in your account a short time after that.
Pre-qualification Expectations For Quick Loans For Bad Credit
Lenders often have expectations that they want borrowers to fulfill before they can consider them for an online loan, despite them having poor credit. These expectations help to meet certain requirements of the law and of doing smooth business transactions. The general expectations are:
The borrower is to be of legal borrowing age (above 18 years)
The borrower is to have an identity card from the government (a state ID, a driving license, a military ID, or a passport)
The borrower is to be a U.S. citizen or someone who’s gotten permanent residency
The borrower is to have a verifiable income source with regular payments
The borrower is to own a genuine and active phone number, bank account, and email address
Some lenders may have other specific expectations for specific types of quick loans so it’s good to know them as well before you apply for the loan. Also, the general expectation of a borrower to have an income source doesn’t necessarily mean employment. If you have your own small business that’s paying you or pension, disability income, or social security, lenders are still okay with that. Provided you have any legitimate source that’s paying you consistently, you can be considered like any other employed person.
The state you live in may also determine if you’ll get an online loan or not. It may also determine how much you’re going to get. See, some states have heavily regulated quick loans while other states have entirely banned them. So knowing where your state stands between the two will help you know beforehand if you stand a chance of getting a loan or not. And if you do stand a chance, it’ll help you know if you’ll get your desired amount.
Some of the states where access to fast online loans is denied include Colorado, Connecticut, Arkansas, Massachusetts, Montana, Maryland, New Jersey, New Hampshire, North Carolina, New York, the District of Columbia, South Dakota, Georgia, West Virginia, Pennsylvania, and Vermont.
The states where the access is granted include Kentucky, Kansas, Mississippi, Michigan, Minnesota, Missouri, Alabama, Alaska, Hawaii, Rhode Island, California, Louisiana, Texas, North Dakota, Utah, Nevada, Iowa, Delaware, Indiana, Florida, Idaho, Illinois, Washington, Oklahoma, Wyoming, Ohio, Wisconsin, and Oregon.
The Positives and Negatives of Quick Online Loans
Fast loans have some very attractive benefits that make them popular, but they also involve some risks that many borrowers find worrying. Understanding both will help you know how to make the most of the loans while guarding yourself against worrisome risks.
Quick release of money to borrower’s account
Minimal-to-no hard credit checks
Collateral isn’t a necessity
Straightforward online application
24-hour access to loans
No physical documents are required
Fast decisions and feedback from lenders
Skyrocketing interest rates
The risk of getting into a debt loop where you take a loan to pay another loan
The need for a guarantor or collateral when you want a big loan amount
Additional charges such as late repayment fees and origination fees
Negative impact on your credit score if you fail to repay your loan
Other Sources of Money Except for Fast Loans
When you’re in a tight financial position, quick loans may be a reliable financial source. However, other more reliable sources exist that you can use to get quick access to money with no interest required as you repay.
Considering these options before you opt for online fast cash loans can save you time and money, and eliminate the risk of being owed more than you currently are. Quick loans should be the last source on your list. Other good sources may include:
Putting your less-used stuff on sale - Having some equipment or items of value that are lying around the house without being used when you have a financial issue isn’t good. You can get them sold and get some or all of the money you’re looking for to deal with that quick financial issue you want to address. If there’s fitness or music equipment that you barely use that a friend or an acquaintance recently expressed interest in, now may be the best time to let it go. If no one you know has shown interest in it, many others out there may find it useful. Although selling your stuff may not bring quick money, it may at least save you from the interest rates of quick loans.
Reaching out to family, relatives, and friends - When raising the money by yourself fails, you can approach your closest people for help. Any good friends, relatives, and family can either give you the money or loan it out to you. Whichever way they choose to help you, you won’t be expected to pay more than you’re given (as with loans from lenders). Nonetheless, when any of the mentioned people extend their hand to you, be sure to repay it kindly. Pay the money back promptly and show your gratitude to them in the way you think will please them.
Seeking donations through not-for-profit institutions - There are several organizations that exist within our communities that are dedicated to helping needy people. They offer help in terms of foodstuffs and money. You can look up any such institutions in your locality and visit them. If you can provide proof that you’re needy and you’re willing to do anything to get their help, you can get the money you need. It may also help to volunteer to do a task they’d want to be done but can’t get someone to do it. The willingness to go the extra mile for them can come in handy for you.
Getting credit union or bank loans - Loans from your average bank or through credit unions can be of use during difficult moments in your life. Although they may not be fast to approve and release the money, they may still help somewhere if your emergency can wait for around one week.