Picture this: two days before the end of the month, with £50 in the bank, you slip on the stairs and fracture your leg. The doctor advises complete bed rest for a month and hands over a thousand pound bill. You turn to friends and family for loans, but they can only cough up a few hundred pounds at most. You’re now £600 short with the bills mounting up.
This is exactly the kind of situation where cash loans can come in handy. Cash loans are useful financial instruments with a lot of advantages (and some disadvantages) as we will learn below:
What is a Cash Loan?
A cash loan, also called a cash advance or a payday loan, is a short-term, collateral-free loan paid out in cash. Since cash loans are usually approved within a few hours, they are a great way to meet an immediate, unexpected financial need.
There are a number of lenders for cash loans in Essex. Loan amounts are typically low (between £100 and £1000) and the approval process is extremely efficient. Although lenders do perform a background check and credit history verification, they are more interested in your ability to pay back the loan amount within the stipulated time period (usually a few months).
However, before you rush to your nearest cash loan Essex lender, there are a few things you must consider.
Advantages of Cash Loans:
1. Quick and Easy Approval: The growth of online lending platforms has made the cash loan approval process extremely efficient. You only need to supply your name, address, financial details (net monthly pay, expenses, credit information), and desired loan amount. Most loans are approved within hours with direct bank transfer facility.
2. Relaxed Qualification Criteria: Most cash loan operators only require that you be over 18 years of age, have some form of permanent employment, earn more than £500 per month and hold a valid debit card.
3. No Collateral: Cash loans are offered without any collateral, which means you can get paid without putting up anything upfront. This is a great way to meet a financial emergency.
4. Short-Term Repayment Options: Cash loans need to be paid back within a relatively short time frame. This is great for people who don’t want to deal with long-term debt.
However, it isn’t all flowers and sunshine; there are some significant disadvantages of cash loans as well:
Disadvantages of Cash Loans:
1. High Interest Rates: A major disadvantage of cash loans is their high interest rate, which can be 15-20% higher than equivalent loans from conventional lenders. The high risk associated with cash loans (which are offered without collateral, after all), necessitates such interest rates. However, by paying back the loan in a timely manner, a borrower can significantly cut down on his interest liabilities.
2. Short Repayment Duration: Many lenders require outstanding loans to be paid back within a month. Unless you have a source of cash in the near future, this will hamper your ability to repay the loan.
3. Cannot Miss Payments: Big banks and institutionalized lenders tend to be quite lax when it comes to payment collection. Missing a payment with a small cash loan lender, however, can have severe consequences in the form of higher interest rates and aggressive collection tactics.
Should You Get a Cash Loan?
The answer: it depends on your situation.
Based on the above, it is clear that cash loans fulfil a very specific need: easy, immediate cash in a financial emergency. These are high risk, high interest financial instruments that you should turn to once in a blue moon, and only for legitimate emergencies. Using them to meet rental payments, car loan payments, etc. on a regular basis will only lead to financial ruin.
So before you decide whether a cash loan is right for you, assess your current situation. If it’s a one-time affair, then go ahead and fill out that loan approval form. If it’s a habit, you are better off finding alternative financial arrangements.