Online instant loans are short-term loans that don’t require any credit inquiries. When you are under financial pressure, need money urgently, and don’t have strong credit, an instant loan might be just what you need.
Within a day or two after getting approved for an online instant loan, you can obtain the money to cover any expenses. But while the term “instant loan” may sound convenient, there are potential drawbacks you should not miss.
As such, it’s crucial to know how they really work before applying for one. If you’re considering taking out an online instant loan, here’s what you should know first.
Types Of Instant Loans
Most of the instant loans available today include the following:
Car Title Loans
Your car’s title guarantees this loan. Will I still be able to drive my car? The answer is YES! You still get to use it. However, you must pay off the loan in full, plus the interest fees, by the due date, or else you risk losing your car.
Pawn Shop Loans
This instant loan is a secured loan, which means the pawnshop possesses an item you own as the loan’s collateral. You obtain a loan of a lesser value than the item in exchange for the collateral. If you fail to pay off the loan by the due date, the pawnshop will seize it and claim ownership.
Payday Loans
This loan does not require collateral and gives you the borrowed amount the same day you’ve applied or within the next day. You must pay off the loan in full, including the interest fees, by your next pay.
How Do Online Instant Loans Work?
Instant loans may range from 100 to 1,000 dollars. If you are thinking of using this loan option, here’s how it works:
- Apply. As mentioned, instant loans don’t usually require a credit check. Even so, you will need to present a valid ID, provide your personal information, have a bank account, and show proof of income.
- Write an ACH authorization. Online lenders will require an Automated Clearing House (ACH) authorization for your bank account.
- Obtain the loan amount. If you have given your lender access to your bank account, they can directly deposit the loan funds there. If not, you’ll receive it in a lump sum in cash.
- Pay off the loan by the due date. Make sure to repay the loan in full by the due date and don’t miss a payment.
Most instant loans marketed today are in the form of payday loans, which are infamous for coming with hefty interest fees. Lenders usually charge fees of at least fifteen dollars for every one-hundred-dollar loaned, depending on the laws in your state and the loan terms.
With that said, if you fail to pay off the loan in time, the loan will be rolled over to defer the repayment period. As a result, the fees will be doubled, making it more difficult for you to stay on top of your loan.
Why Should You Consider Online Instant Loans?
Online instant loans make it more straightforward and uncomplicated for borrowers to obtain the cash they need. These loans are designed for unexpected financial challenges and emergencies.
Here’s why you should consider online instant loans when you’re in a financial pinch.
1. Excellent Option for People with Bad Credit
To get an instant loan, borrowers don’t essentially need an outstanding credit score. Today, there are many options for bad credit borrowers, and lenders who offer such loans will consider a few factors, such as their employment history and income.
2. Competitive Terms and Rates
Because online instant loans are highly accessible to borrowers, lenders tend to go head to head against each other. This situation helps borrowers find loans with better terms and rates. What’s more, they can effortlessly research lenders beforehand and get preapproved to determine what terms and rates they can expect.
3. Swift Application Process and Funding
Modern technology has aided lenders in streamlining their loan application process, freeing the borrower a significant amount of time applying. Some online lenders allow borrowers to fill in their personal information online and upload documents from the luxury of their homes. And from there, the loans can be funded within one or two days.
Final Thoughts
Online instant loans have helped many people get funds fast to cover emergencies and other expenses. If you’re considering to borrow when you need money urgently, make sure to take the time to look around and compare offers.
It would be best if you verified the credentials of the lender so you won’t end up getting a loan from scheming sources. Also, if you think an instant loan is your only option, be sure to read the instant loan lending regulations in your state.
Aidan has been writing about personal finance for over 6 years. Prior to this, he worked as a Corporate Finance Analyst where he specialized in Due Diligence, Company Valuations and more. He is a CFA charterholder.
