The simple process of applying for a fast and easy personal loan is one reason why it’s a popular choice among borrowers who need cash fast. If you’re one of those considering this type of credit to cover an unexpected expense or an immediate financial need, it will help if you first do some research before you begin your application. And this article will help you with that by presenting you with a comprehensive overview of this instant loan type.
A personal loan allows an individual to finance various purposes. This may include buying a car, renovating one’s home, paying medical expenses, starting a new business, or even consolidating debt. Personal loans are unsecured, meaning that collateral isn’t required from the borrower, which correspondingly carries higher costs compared to the secured type.
What this means is when you default on your personal loan, the creditor doesn’t have a claim on any of your assets. It also means that there is a lesser chance of you availing better terms the next time you borrow since defaults gravely affect your credit score. In some cases, you could get slapped with a lawsuit if you fail to meet your obligations.
Now, a fast and easy personal loan exhibits a slight difference from the standard personal loan offered by most lenders. One is that funds can be received as soon as the next day or sometimes even during the same day of the approval.
Another is its more relaxed requirements. For instance, specific varieties of quick personal loans accept minimal credit scores and, to some extent, no FICO score requirement at all. This is helpful if you are starting or don’t necessarily have an excellent credit history.
Also, a fast loan’s purpose is mostly geared towards getting by a temporary financial hurdle and may not necessarily be for acquiring big-ticket items.
Nonetheless, it would be best to understand that this type of loan tie in with higher costs or higher annual percentage rates. The reason is that lenders are also taking greater risks in extending credit with more leniency, and higher rates are a way for them to counterbalance this risk.
And since personal loans do not require collateral, the only guarantee of repayment for lenders is your creditworthiness, so when you apply for personal loans, lenders may also do a hard pull of your credit score.
Creditors have different sets of requirements for their loan products. Some are strict while some are less strict, so it is vital to know if you meet most of what they ask for before applying. Primarily, lenders will offer prequalification options, which doesn’t guarantee you the funds but is one way to know if you are eligible.
If you fill up one of those online forms, you’ll find that lenders will ask you about your credit score, income, expenses, or other debt obligations, as well as the length of credit history.
Such data are gathered so the lender can determine whether you fit the minimum credit score requirement (which varies by lender) and the minimum length of credit, usually a minimum of three years.
Lenders also need information about your income and expenses to know if it falls under an acceptable debt-to-income ratio, like 28% or 36% if using the back-end ratio.
Based on the information you provide, lenders will make a soft inquiry to inform you if you qualify for the loan or not. This process completes within seconds or after a few days.
As stated earlier, there are different quick personal loan types, and such requirements like the ones mentioned above may also vary between lenders. But it is essential to know the varieties of this kind of loan that would suit you before engaging with a creditor. So here are some of the fast personal loan types you can consider:
The amounts you can borrow are a few hundred dollars, and the loan terms are from one to two weeks. The requirements for this loan type isn’t that stringent, which is why it may suit borrowers with poor credit.
But, of course, it comes with high-interest rates that may tot up to a 400% APR for a two-week loan.
Emergency loans may range from a 5.99% APR to 35.99% and have longer terms, extending up to 60 months with some lenders and larger loanable amounts (up to $35,000). Funds can also arrive during the next business day, and the approval process takes roughly an hour.
However, for this loan variety, stricter requirements on FICO scores apply. Most lenders want borrowers to have a good credit score, so you must evaluate your options carefully.
In fact, the only requirements for this loan type is a source of income, a valid ID proof, and a checking account, and the approval process can be as quick as a few minutes.
And like instant personal loans, payday loans also have very high rates; it is estimated that most payday loan lenders charge up to $15 to $20 per $100 borrowed. The main difference between the two is that the loanable amount for a payday loan depends on your salary, while instant personal loans is usually based on a specific amount set by the lender.
This type of loan is much more suited for those with good credit scores but needs cash asap. A lender like LightStream may offer an APR range of 3.99% to 19.99% with AutoPay and a loanable amount of up to $100,000.
However, to qualify and get the best terms for their same-day personal loan, an excellent credit score and credit history are required.
The amount you can borrow will depend on the kind of loan you applied for, as the quick loan types discussed above will only grant you from several hundred to a few thousand dollars. Most of the advertised APR and loanable amounts of lenders are for those with excellent credit scores and extensive credit history.
This means that you would have some work to do in improving your creditworthiness so you can get a more considerable amount. However, if you qualify for such a loan type, your lender can extend you a larger amount and better terms.
Due to the high costs and not so favorable terms of getting a fast and easy personal loan, it may be best to use them if you don’t have any other option and need the money right away. You can first try to borrow from someone you know, especially if it’s not a huge sum, before considering an instant loan. Otherwise, you can choose from these two options:
No, unless you proceed with the offer and apply. Usually, prequalification results only in a soft credit inquiry, and this happens even with credit card applications, and soft inquiries don’t affect your credit score.
Applying for personal loans is usually safe if you choose a reputable lender. But the thing you have to look out for are warning signs of a scam, such as when a lender asks money for you upfront and pressures you to act immediately.
Yes, some lenders offer emergency loans for those with bad credit. But despite this, you have to remember that this usually comes with higher rates.
Prequalification doesn’t guarantee that you’ll get that loan. Prequalification essentially provides only a review of your creditworthiness based on the information you provided in your application. You will also get a preview of what you can borrow.
Payday loans usually don’t hurt your credit score, especially if you pay it in full and on time. In the United States, “payday loans are not reported to the three major national credit reporting companies, so they are unlikely to impact your credit scores”, according to the Consumer Financial Protection Bureau.