It seems that financial emergencies are the norm these days. We have been bouncing from one financial crisis to another for the last dozen years. When you have bad credit and you need a loan fast, a two day wait is usually acceptable but loan denial is not.
Luckily, the internet has brought us all the ability to get the money into our bank accounts within a few hours of applying. You just have to meet the conditions and requirements the lenders set forward. It is also a truism that the cost of instant approval is higher than if you can wait a day or two for an approval.
The reason that an online lender can grant you instant money is that they are not performing any credit checks on you. This means that they have to use other means to ascertain the risk of you defaulting on the loan and your ability to make monthly payments.
What Does Instant Approval Mean?
Instant approval does not mean that there is no approval process. To believe that anyone who does not know you personally will just give you money without doing some form of checking is insane. Yet instant approval seems to indicate that sanity is overrated.
The approval process used by online lenders is very streamlined since there is no credit checking. Credit checking takes several hours and that is one of the things that slow down traditional lenders in the approval process.
Online loan applications use computer software to examine the loan approval criteria. The software can quickly calculate your debt-to-income ratio and determine if the loan is affordable for you. The software can then send out the email and start the transfer of the money into your account.
Instant Loans are Not Perfect
With all the good news surrounding instant loan approval, there is some bad news. Mainly, having bad credit makes the loan more expensive over time.
Expect to pay an extra 1 percent interest on your loan by going through an online lender with instant approval. They will also have lower maximum loan amounts, some of which may be only $10,000.
What About Payday Loans?
It is impossible to turn on the radio or television today without seeing an ad for payday loans. Payday loans have become a common loan option for many people. It is almost impossible to be turned down for a payday loan as long as you have sufficient income.
The premise behind payday loans is that you are borrowing money in advance of your next paycheck. The original payday loans would take the entire repayment out of your bank account on the day of your next paycheck. This made the loans risk-free for the lender.
Originally, payday loans were limited to amounts ranging from $100 to $1,500. They would charge 30 percent interest. Today payday lenders will lend much larger sums at higher interest rates. If you cannot pay the loan back quickly, payday loans are very poor financial choices.
Payday loans can be useful if you can pay them off within a month and use the money to eliminate other debt. This will increase your credit rating and will allow you to obtain better personal loans to consolidate your existing debt.