Pros and Cons of Instant Cash Loans

The prompt to take out a loan is everywhere. You can see them on websites, TV ads, and social media platforms. And with the popularity of instant cash loan options, resisting this has never been easy. 

So, you can get small loans instantly, as long as you have a device and an internet connection. However, you might want to consider what’s good and what’s at stake before getting your hands dirty. 

To this effect, we have outlined some of the pros and cons of instant loans below. 

What this article covers:

What Is an Instant Loan?

Instant loans are fast cash loans that don’t require document verification and are high risk to the lender. This is why they have high-interest rates and shorter repayment duration. 

However, you can use an instant cash advance to solve several needs, from grocery payments to school fees, unlike regular loans that require a specific purpose before taking them out.

Talking about taking out loans: instant cash loans don’t require a broker or high credit score. They’re approved within a few hours of requesting them and are best for emergencies. 

instant cash loans

Pros of Instant Cash Loans

Quick cash loans are remarkable for their convenience. Below are some of the advantages of getting one today. 

Fast and Easy Registration

Applying for instant cash loans online can take anywhere between 5 to 10 minutes. Once you’ve found a reliable lender to borrow from, the remaining steps are easy. 

First, the lender will require you to fill out an online form. This will have spaces where you can enter your details, such as.

  • Your name
  • Date of birth 
  • Contact Details
  • Relationship status
  • Citizenship
  • Loan amount

After this, you’ll receive a code on your mobile phone to verify your phone number. Once you’ve verified your phone number, you need to enter your bank details and receive your loan amount in a few hours. 

Fewer Requirements

Applying for a cash loan was like a hard nut to crack before now. You’ll need to provide copies of several documents, pass a few interviews, fill out a four-page form, and provide two signees – the requirements go on and on. Yet, there’s no guarantee that you’ll get the loan after all this. 

instant loans

However, you can get instant cash with cash pay loans without these requirements. By this, we mean no more signees, interviews, and lengthy application forms. These are the only requirements to apply:

  • Must be older than 18 years 
  • Must be an Australian citizen
  • Have a Tax File Number or a government-backed ID
  • Have a regular source of income
  • Have an active bank account.

General Purpose

When taking out a regular loan, lenders will require you to take it for a particular purpose. For instance, you can’t use a mortgage to pay medical bills. 

However, this isn’t the case with instant small loans. You can use these loans to settle your financial needs, regardless of what category they might fall in. For instance, you can use urgent cash loans to pay your business, medical, or personal bills. 

No Credit Checks 

Credit checks are like the borrowers’ nightmare. They have a lot to determine when it involves taking out a regular loan. For instance, you can get a low or high rate based on your credit score. And in some cases, you might not get approved for a loan at all.

But instant loans allow you to get money instantly without checking your credit score. While this is good, it also helps to preserve your credit score. How, you ask?

instant loan

Preserves Credit Score

Taking out a regular loan lowers your credit score, but here’s how easy cash loans have the reverse effect (preserves it). 

Anytime you apply for a regular loan, the lender performs a hard inquiry on your credit report. While this is to help them check your eligibility to receive the loan, it can drop your credit score by five points. 

However, instant online loans don’t require any credit check. This means there’s no impact on your credit score when you take them. 

Cons of Instant Cash Loans

While the benefits outweigh the disadvantages, you might still need to consider the downsides. So, we’ve outlined a few of them below. 

High-Interest Rates

Cash lenders offer outrageous repayment rates on their sites. You can pay as high as a 40% annual payment rate (APR), which is massive when compared to regular loans that charge 10% or less in APRs.

However, the high rate is compensation for the risk on the lender’s part since instant money loans are unsecured. They also help to keep borrowers in check and prevent overborrowing. 

Collection Method

Some lenders require you to sign a Continuous Payment Authority (CPA) whenever you apply for an instant cash loan. This enables them to take the loan amount from your bank account automatically. In other words, the lender can remove funds from your account without your consent once you agree to this. 

instant loans australia

Less Repayment Time

Instant loans usually last for a short period. Lenders might provide a maximum of 12 months payment duration, which might not be convenient. This might force you to take another loan if you can’t meet up with deadlines. 

Debt Cycle

With less time allowed to repay your quick loans, you might be forced to take out a new loan to settle the old one. And collecting a new loan won’t be hard since you can get cash loans easily. But while this might be more considerable in a refinancing situation, you might be entering a debt cycle because you aren’t negotiating for a lower rate in this case.

When to Consider an Instant Cash Loan

Knowing when to take out a cash loan can help save you from debt and improve your financial habits. Here are some situations when you can consider instant cash loans.

Emergency

Sometimes when an emergency surfaces, we’re met unprepared for it. Quick loans can come in handy in these times, especially if the issue is pressing and you can’t wait more than an hour to get funds. 

Last Resort

Apart from quick loans, there are other options that are more friendly. For instance, you can take a soft loan from a friend or family member if needed. But an instant loan can become the last resort when this option isn’t possible. Ensure you have explored all your options before settling for them. 

Meet Deadline 

Meeting repayment deadlines can save you from paying extra fees. So, ensure you can repay the fast cash loan before taking it out. In essence, you should have an income flow before applying for a loan. 

instant loan australia

When Shouldn’t You Apply for an Instant Cash Loan?

Here are a few situations where you should avoid taking an instant cash loan. 

Unimportant Expenses

Classifying your desires into needs and wants can help you make better financial decisions, like whether or not to take an instant cash loan. For instance, taking a loan to buy a new phone that you don’t need is an unnecessary expense. 

A good rule of thumb will be to ask yourself a few questions, like:

  • What’s the situation at hand?
  • Can it wait for at least 24 hours?
  • Can I do without it for now?
  • What’s the impact of not settling the need?

If the answers to these questions show a lack of urgency, you should probably not take the loan.

Pending Debt

Taking on a direct cash loan might not be the best decision if you have pending debt. This is because your income might not be able to cover all your debts, leading to an endless debt cycle. 

instant cash loan

No Income Flow

You can avoid instant loans if you don’t have a steady income flow. They have high rates and short repayment periods, which might be hard to meet without a regular income source. Instead, try other means like borrowing from family, friends, or colleagues.

Conclusion 

Taking an instant cash loan is no plague – there are bound to be some disadvantages. However, the benefits outweigh the disadvantages, especially with financial management skills. 

Managing your finances requires you to know when to take a loan or not, prioritise your needs over wants, and borrow within your income limits. 

Was the guide helpful? Check out these extra resources to delve deeper: