
Instant loans are small loans known as payday loans or emergency loans. The aim of these loans is to help tide you over during unforeseen expenses. Instant approval is what makes these loans popular among borrowers. In times gone by, payday loans received a barrage of backlash after a probe was carried into payday lending practices at the instigation of borrowers, which later revealed that lenders were charging exorbitant interest rates.
Though several payday companies ceased to operate, loans continued to be part of the lending market. Lenders kept selling these loans in the names of cash loans, text loans, instant loans and bad credit loans in Ireland. However, you need to search a lot to find out the responsible lender to apply for any of these loans. Affordability is key especially for those with poor credit ratings. They can certainly enhance their credit profile if they get flexible repayment terms.
Although instant loan providers strictly comply with the FCA guidelines, they are still expensive. Caution is enjoined. Otherwise, you will highly likely be caught in an ongoing cycle of debt. Instant loans are aimed at meeting unforeseen expenses, so neither the size of the loan is bigger nor the repayment length. Most times, these loans are required to be discharged in full within a month.
Advantages of instant loans
Here are the benefits of instant loans:
- Fast approval
Quick approval is the hallmark of these loans. Your loan is approved the second that you put in the application form. As the borrowing sum is paltry, the lending decision is made after taking into account the financial details you provide in the application form. Most of the lenders do not run hard credit checks especially when the borrowing sum is less than €500.
As these loans are aimed at subprime borrowers, it is evident the applicant must have a poor credit rating. Therefore, these loans are also known as instant cash loan in 1 hour in Ireland without a credit check.
- No search footprints
Instant loans do not involve hard credit checks, and therefore, there is no fear of losing your credit points. Search footprints are visible by other lenders, and each time an inquiry is made, you lose your credit score by at least five points. Multiple inquiries could result in a steep decline in your credit rating.
Borrowers with a bad credit rating are often in pursuit of protecting their rating from being damaged due to hard inquiries. Instant loan lenders run soft credit checks and they leave soft search footprints which are not visible on your credit file.
- Convenient
Another benefit of instant loans is that they are convenient. They do not include paperwork. In fact, the online application form does not require you to fill in too many particulars. Lenders generally take an idea of your expenses and the wiggle room in your budget to ensure you do not struggle with payments. Because soft credit checks are made, you do not have to wait for days to get the nod.
- No collateral needed
The maximum amount you might be able to borrow using instant loans is €1,000. It is not too small, and yet lenders do not require collateral. The default risk is always high because you are already a subprime borrower, and these loans are discharged in fell one swoop on the day after your next payday. Even so, there are no formalities related to collateral.
Larger loans are secured against collateral. In case of default, your lender repossesses the security and liquidates it to cover their money. Fortunately, this harsh condition is not imposed when you have to take on instant loans. You do not have to be afraid of losing your valuable asset.
Drawbacks of instant loans
Here are the drawbacks of instant loans:
- High interest rates
Instant loans are aimed at subprime borrowers. Your credit score reflects your past payment behaviour. If it is not impressive, you will be presumed to be a borrower with a high default risk. Lenders will call your credibility into question, and since they do not have collateral to fall back on in case of a default, the risk is too high on their part. They charge high interest rates to mitigate the risk involved in lending money to you.
- The risk of a default is too high
As instant loans charge exorbitant interest rates and require you to pay off in a lump sum, there is a high possibility of falling behind on the payment. Most of the time, the repayment length of these loans is not more than a month.
If you fail to arrange the whole debt amount by the due date, you will be charged interest penalties and late payment fees. They increase the size of the debt, and then you will find your debt even more difficult to settle. Penalties will keep adding to your account, and then you will fall into a deep hole of debt.
- Impact on credit scores
Just because emergency loans are convenient does not mean that you downplay the paramountcy of building a credit score. A poor credit rating will always affect the potential of borrowing and, at the same time, qualifying for lower interest rates. Your credit score will be further damaged if you fail to clear the dues.
Once you are pushed to the “very bad credit score” range, your chances of qualifying for bad credit loans will also go outside the window. Bear in mind that missed payments stay on a credit report for up to six years. The worse your credit score is, the harder it will be to improve your credit rating.
- A limited loan amount
Instant loans will not let you borrow a large sum of money. Though lenders claim to approbate up to €1,000, they put a cap on €700. Sometimes, the borrowing money is not even more than €500. In case you need a shade larger sum of money, you cannot be permitted.
The final word
Instant loans are small emergency loans and they have a few advantages and drawbacks. Never throw caution to the wind while using these loans. You should take out these loans only when you are completely sure about your repaying capacity.