A cash loan is nothing but a personal loan aimed at funding your small, unforeseen expenses. They are ideal when you do not have enough savings to fall back on, and the nature of your expense is urgent. These loans are normally aimed at subprime borrowers, and hence, they do not involve a credit check.
Cash loans are available from only direct lenders. As soon as you put in a loan application form, your lender will quickly check your repaying capacity and transfer funds the same day to your bank account. The processing speed is so fast that you can meet your emergency smoothly.
You are eligible for these loans despite a less-than-perfect credit score. Your lender will run only soft queries to check your contact details, and they will not show up on your credit report. As a result, your credit score remains intact.
Many people think that those with a good credit score cannot apply for these loans, but that is not true. Cash loans are mainly popular among bad credit borrowers who often struggle to manage their money. Studies have reported that good credit people do not struggle with small unforeseen expenses, and therefore, they need not rely on these loans.
What documents are required to apply for cash loans?
Applying for cash loans is duck soup. Visit the “Apply” page of a lender’s website and fill in the application form and the whole process will be done online. You will have to provide financial details that your lender will use to understand if your budget has room to repay the debt along with your monthly expenses.
They can turn you down if they suspect about your repaying capacity. Make sure you provide all financial details accurately because you will end up falling into debt, leading to dire consequences. While using other loans, it is vital to submit your bank statement and other financial documents, lenders will not bother you to get into these formalities for a paltry cash loan.
Your lender will make a decision on the information you provide. However, some lenders might ask you for a pay slip as proof of salary.
The impact of cash loans on your credit score
Cash loans will not result in a plunge in your credit points when you apply for them. But they can take a toll on your credit score if you fail to clear the debt on time. Cash loans are paid off in a lump sum on the due date as the amount is quite small. There are two reasons why these loans are extortionately expensive:
Higher interest rates for cash loans are charged to lower the risk. As these loans are to be paid back in full, you are likely to make a default. Once you fall behind on the due date, late payments and interest penalties will be levied. Not only will this add up the cost of the debt, but you will also lose your credit points. Your lender will inform credit reference agencies of your defaults.
When cash loans are a good choice
Cash loans are a good choice only when you need money urgently. They have been designed to help you fund the gap in your savings. It is always advisable not to borrow more than you need.
Although lenders will examine your repaying capacity, you should carefully check whether you can afford to pay off the debt. Avoid borrowing money if you cannot.
Is there an alternative?
These loans cannot help you build up your credit score, but they can hit it when you make a default. Consider budget-friendlier alternatives such as a credit card.
Credit cards offer an interest-free period to pay off the balance when your bill is generated. They are more convenient when you need money for emergency reasons.
Although you have borrowing alternatives, you are highly recommended to create a budget and set aside money for a rainy day. You should have savings to dip into, so you do not need to rush to borrow money every time during an emergency.
To sum up
Cash loans are very small loans and are quite expensive. You should carefully analyse your repaying capacity while using these loans to fund your unexpected expenses. Use a credit card if possible so you can avoid paying interest on your purchase. However, they can also be expensive if you do not pay off the balance in full within the interest-free period.
Jennifer Powell embraced finance writing just the moment she started working as a finance executive with EasyCheapLoan, which is a direct lender in the industry. Jennifer has an exceptionally keen eye for details and used her skills to pen down numerous blogs and articles on finance. When asked, she simply replies with a look on her face that shows how genuinely she cares for people struggling with financial problems. Jennifer works dedicatedly as a finance professional and considers sharing both her experiences and knowledge to increase the financial literacy of people and businesses.
