Instant loans are loans that are given on short-term notice by an organization that is usually not a bank. These work a lot like personal loans but will often have different acceptance requirements. Some may or may not require that you have a certain credit score, and most will usually demand that you prove income.
These kinds of loans are often lumped together with payday loans and people who consider instant loans usually consider payday loans too, as they offer many of the same benefits. Both are significantly different, however. Let’s take a look at whether instant loans are a better alternative to payday loans.
What Are Instant Loans Exactly?
Instant loans are exactly what their name implies. They offer people access to liquiLoans money in various amounts. What differentiates these kinds of loans from traditional personal loans is how fast the whole process goes.
In most cases, you will not have to see someone face to face. You will simply have to complete a form online and send the documentation needed by fax or via email. From this point, the company offering the service will review your application and see if you’re eligible according to their criteria.
These will not always be dependent on your credit score, but they can be. As a rule, however, these are much more accessible than personal loans. You won’t have to wait days or even weeks to get approval. But this comes at a price.
The Drawbacks of Instant Loans
One of the biggest issues with instant loans is the costs. These usually cost more than your average loan. If you take out $100, you can expect to repay anywhere around $15 to $30 in fees. That is way higher than what you would pay through a bank.
But this is because you are seen as a high-risk borrower, and they have to cushion that risk. Know, however, that it is still nowhere near the rates you’ll see on some payday loans out there. Another common issue is additional fees, especially when it comes to late payments.
Every time you miss a payment, you will get fees added to your loan, and this can turn into a vicious cycle. This is why you need to take these loans very seriously and know what those late fees are.
What’s the Difference between Payday Loans and Instant Loans?
There are plenty of differences between instant loans and payday loans that you should know about. For one, instant loans are usually slightly tougher to get. The amounts that you can borrow through an instant loan are usually larger as well.
Payday loans should be used for emergency purchases and are often used as an advance on your pay. Instant loans are a true alternative to a traditional personal loan through a bank. Repayment terms are usually much longer and the interest rates, while being higher than with most bank loans, are still lower than with payday loans. It’s not uncommon to see payday loans with 300% APR out there. This is why these are not a viable long-term option.
With instant loans, interest rates can be adjusted according to your finances and your level of risk. You have lenders like LoanExpress that could give you something that would be comparable to the rate you would get on a bank loan. You’ll also be able to stretch your payment over multiple months. This makes them a more flexible option.
Are There Cases When a Payday Loan would be Better?
One of the ways a payday loan could be a better option than an instant loan is if your finances are in complete shambles. If you know you won’t qualify for an instant loan and all you have is a regular source of income, then payday loans might be your only option. The other case where a payday loan could be a good option is if you only need a small sum of money.
If you need money to deal with an unexpected expense, a bill, or simply to buy groceries for a week, a payday loan could be a good option. They are convenient and easy to get but you have to be 100% sure that you’ll be able to repay on time. You also have to make sure that you understand the penalties in case you’re late or have to default.
Cases when Instant Loans are Better
Instant loans are the best option if you feel like you don’t have the best credit but still have good finances overall. In this case, you might be able to get a larger sum of money through an instant loan and be able to repay it over a longer period. This makes these loans more versatile.
While these can be used to cover emergencies, they can also be used to fund projects. Some people may want to use them to make some renovations on a house, for instance. Some may be going on a trip and want a little more pocket money so they can feel comfortable. Or some people may want to cover some business expenses, for instance.
Instant loans can also be used to cover medium expenses. This could be enough for you to buy a small vehicle or fix your current one. Or you may be able to use it to buy initial inventory for a small business. This isn’t something that you could do with a payday loan. Not only that, but you won’t have to worry as much about repayment and fees. Hopefully, you will have a plan and know where the money is going to be coming from.
Either way, you’ll have much more space to work with and fewer chances of missing a payment date if you keep the payments manageable and don’t borrow more than you need or can repay. At the end of the day, instant loans will usually be the best option if you can qualify. They’re more flexible and work like traditional loans. Payday loans should be viewed as a last resort option and can be dangerous, so think twice.