While instant loans or instant cash often have a bad reputation, does it sometimes make sense to use these services? If you need money quickly on a short-term basis, these instant cash loans could be worth it.
However, you want to avoid the payday loan cycle which can quickly send your budget down a spiral. As long as you’re mindful of the risks and what you’re agreeing to, there are situations when it could be a smart idea to go for instant cash. To learn whether this is a good fit for you, read the full guide below.
What Is an Instant Cash Loan?
First, let’s define what an instant cash loan is and how it works. Also known as a payday loan or instant cash advance, these are a type of short-term loan. The name “payday loan” refers to the nature of these loans as helping you get through until payday when you pay your loan back.
While that all sounds innocent enough, the real trouble with these loans is the high interest rate and the high fees. If you’re able to pay your loan promptly and on time, you won’t have these negative side effects.
That being said, these loans are known to be predatory. They advertise to those in a sticky spot in need of fast cash. Though the quick payment is alluring, if you’re not able to pay it back on time, you could face steep fees and costs long-term. This is what’s known as the payday loan cycle, and it’s hard to break.
When to Go for Instant Cash
With all of that in mind, are there situations when it makes sense to go for instant cash or payday loans? Most people are tempted by these loans in emergency situations, like if they need a sudden car or home repair. While it’s true you can get cash quickly through one of these lending schemes, you’re likely to face an interest rate upwards of 300%.
When does it make sense to go for instant cash?
- Repayment plan: You have a clear plan for repaying your loan as soon as possible (within 1-2 weeks, since these loans often charge interest every 2 weeks).
- Fees: You’ve calculated any added fees and interest and you can afford these without stressing your budget.
- Terms: These loans often hide terms, conditions, and fees in the fine print. You need to go through this before you agree to instant cash.
- Other options: You’ve considered other alternatives to payday loans and you’ve decided this is the best solution.
If you’re aware of the risks and have a clear plan to repay your instant cash quickly, you can go for instant cash confidently. Yet, it’s important to fully read the fine print and understand the terms before you agree to any type of loan.
Alternatives to Instant Cash
In most cases, it’s not a good idea to choose instant cash if you’re in a financial pinch. While it’s scary to have a last-minute expense or to need cash quickly, there is almost always a better choice than instant cash or payday loans.
What options are available depend on your credit, income, and current debts. However, even people with bad credit can access alternatives to instant cash that aren’t as risky. These options below are a good fit, and you can work with a financial expert to find what works best for you.
- Personal loan: Instead of an instant cash loan, a personal loan is much more trustworthy and carries a lower interest rate. Because these aren’t short-term loans, you have more time to create a repayment schedule.
- Build an emergency fund: The best way to avoid needing instant cash is to build your emergency fund. When you have money put aside for an emergency, you don’t have to lean on instant cash to make it to your next payday.
- Credit card: While opening credit cards isn’t something you should do lightly, the interest rates and fees on credit cards are significantly less than these short-term payday loans. They’re also easier to consolidate and pay off quickly.
- Talk to your lender: If you’re at risk of missing a payment, talk to your lender. They might have a deferral period or something else they can do if you’re experiencing economic hardship.
- Borrow money: Last but not least, borrowing money from a loved one is always better than entering a short-term, predatory loan.
What Type of Loan Is Right for You?
Nobody wants to find themselves needing instant cash. However, sometimes things happen that are out of your control. As long as you’re aware of what you’re agreeing to and you’ve considered all of your options, an instant cash loan isn’t necessarily a bad choice. The danger comes when you’re unable to pay what you owe on time.
When in doubt, talk to our experts. The professionals at Debt Busters have over a decade of experience helping Aussies create a long-term budget, repay loans, and find what’s right for them. Contact our team on 1300 368 322 to get started today.