If you find yourself in a financial bind, you need a quick and easy way to access the funds you need. Fast loans can get you there.
Designed as a way to help borrowers cover repairs, emergencies, and other short-term needs, these loans can help you find your footing and pay for the products or services you require.
Yet, as with any type of loan, there are pros and cons to going this route. Is a fast loan right for you? Today, we’re exploring the benefits and drawbacks you need to know.
Pro: They’re Convenient
When you need quick money, a traditional loan might be out of the question. This is due to a number of reasons, including an often lengthy, time-consuming application process and strict credit requirements.
On the other hand, fast cash loans are quick and convenient to access. Not only are the applications shorter and easier to complete, but you can even find some that don’t require a credit check at all! This way, you can have money in your hand as soon as the next business day, which greatly expedites the process.
Why is timing important? Most borrowers need a fast loan to help cover an emergency expense, which often can’t wait. If your car breaks down or your HVAC unit conks out in the middle of the summer, you can’t afford to spend months searching for the right lending product.
Pro: There Are Fewer Requirements
With any type of fast loan, including a payday loan, you can expect to spend just minutes completing the application. Most are available online, accessible from anywhere at any time. While you may need to provide some type of identification or employment verification, there are much fewer hoops to jump through with these.
As mentioned, many lenders don’t even check your credit before qualifying you for a loan. Instead, they look at your employment history and other pertinent documents to assess your creditworthiness. If your credit score isn’t where it needs to be, this is a major perk.
Conversely, traditional loans often require you to submit a bevy of personal files along with your application. This may include your:
- Social Insurance Number (SIN)
- Proof of income
- Photo ID
- Tax returns
- Credit check
These documents are required to verify your ability to repay the loan. With a fast loan, the list is shorter.
Typically, lenders only require applicants to be at least 18 years old with a regular source of income. You should also have an active bank account for the funds to be deposited into, as well as a government-issued ID.
Pro: They Are Unsecured
Secured loans are ones that require you to put up some type of collateral, such as your home or car, to protect the lender. If you default or have a delinquent payment on the loan, the lender can claim and sell those assets to help cover your costs.
While this step is in place to protect their investment, it can carry a major risk for borrowers. Thankfully, most fast loans are unsecured. This means you don’t have to use any of your personal property as security.
Keep in mind, however, that lenders will have access to your bank account. If you carry an outstanding balance that you can’t pay, they do have the ability to send that debt to collections or pursue legal action. This is why it’s so important to pay your loan back in full and on time!
Con: Interest Rates Are High
When you apply for a loan that advertises quick cash, pay close attention to the interest rates. You’ll notice that they tend to be significantly higher for these types of lending products than others. That’s because the quicker application and approval process puts the lender more at risk.
Depending on the province, the interest rates on some payday loans in Canada have soared as high as 548%, according to this report that measured payday loan spikes during the COVID-19 pandemic.
This can make it harder for borrowers to pay back these loans. In turn, this can lead to a cycle of overspending. Before you take out a fast loan, make sure you can cover the costs once they come.
Con: They Can Exacerbate Debt
Fast loans are only a viable option when you know you can pay them back quickly. While lenders will often offer attractive terms (including longer repayment periods), don’t fall into that trap. You might be able to defer payments for a short while, but you’ll accrue interest and possibly other fees as you do so.
If you can’t pay for those charges, you could be forced to take out another fast loan. You can see where this is going. To avoid falling into a debt cycle, don’t borrow more than you can afford.
Con: You Can’t Use Them to Build Credit
If you’re still working to build your credit score, some loans can help you get there. For instance, making regular payments on your credit card loan or home mortgage can improve your score over time.
However, this isn’t the case with most quick loans. Most of the time, lenders do not report the transaction to the credit reporting bureaus. The only time it will go on your record is if your debt gets sent to collections.
Access Fast Loans When You Need Them
There are both pros and cons to taking out fast loans. When you need money quickly, they can be your best (and only) option. However, you shouldn’t use them if you can’t afford to follow the terms and pay them back on time.
Any time you’re working with a lender, take the time to read the fine print carefully. Know what you’re getting into, and what the expectations include. It helps to work with a reputable source you can trust.
That’s where we come in. When you work with us, we’ll help you apply for a fast loan right on our website. Apply now to get started!