How do cash loans work?

Did your car unexpectedly break down and your payday is nowhere near sight?

If you’ve ever been in a similar pressing financial situation, you may have heard about cash loans. Popularly known for immediate availability by lenders, cash loans are short-term personal loans typically used for financial emergencies.

The process of applying for a cash loan is rather quick and simpler than most other forms of borrowing. Here’s how a cash loan application works-

1. The application process – usually online

You have to fill out an online application form. This usually requires personal, contact, employment and financial details. This essential information will allow the lender to assess your application and determine your eligibility.

Lenders will carry out credit checks. This doesn’t mean your application will be automatically rejected because of your past defaults. They focus more on your recent history and your current ability to repay a loan.

2. Approval

After verifying your information, the lender will outline the terms of your loan. You can easily e-sign this online. It takes a couple of minutes.

3. Disbursal

Once you have signed the offer, the lender will carry out a few final checks before the approval.

Once your application is approved, you will receive the cash on the same day or even within an hour.

So why have cash loans gained popularity? Let’s look at some of the benefits-

  • Fast and Easy Approval

Fast cash loans live up to their name as they are perhaps the quickest form of personal loans. These loans can be applied for, approved and disbursed, on the same day. The application process is easy with minimal paperwork. This makes them an ideal source of finance when unexpected expenses arise.

  • Easy Procurement

One of the major advantages of cash loans is the ease of procurement. You don’t have to visit the bank, as the entire process is online. You can obtain it from the comfort of your home, office or wherever you are. All you need is an Internet connection and the necessary documents.

  • No Collateral

Unlike many other borrowing avenues, cash loans don’t require any collateral in exchange. Since it’s an unsecured loan, you don’t have to put your house, car or any other asset at stake.

  • Credit Score

A bad or lack of credit score is most likely to affect your eligibility to procure a conventional loan. But in case of cash loans, your credit score won’t impact your application. As long as you have a stable and regular income, your application will likely be approved.

  • Quick Disbursal

A medical expense or an unexpected repair will demand immediate funds. The application, approval and disbursal of cash loan are all completed in a day. Once you are approved, you will receive cash on the same day or even within an hour.

Cash loans are certainly a convenient source of short-term borrowing. However, there are a few things you should keep in mind

  • Beware of scammers

Since the process of cash loan is almost entirely carried out online, there is a risk of being scammed.  You should make sure that the lender has all the necessary accreditation before sharing any information.

  • Borrow for emergencies only

The ease of obtaining a cash loan doesn’t always make it the best option. A cash loan should be considered when you know your next pay cheque will come through on time. Moreover, only choose a cash loan for emergencies that can’t be deferred. It would be a poor decision to avail yourself of a loan for something that’s frivolous and unnecessary.

  • Fees and cost involved

Don’t be deceived by simplistic terms and conditions presented by some lenders. Thoroughly read and understand what fees and costs are involved so that you’re not caught off-guard by hidden costs.

  • Repayment period

The repayment date might just sneak up on you. The repayment period is short compared to the amount you have to repay. Often lenders impose considerable fines for delayed payments.

  • Limit the borrowing

No matter what the borrowing limit is, only borrow the amount you actually need. Borrowing more would also mean a higher amount to be repaid. So, try and limit the borrowing.

Now that you have a better understanding of how cash loans work. Remember, it is important to research thoroughly before signing up for any kind of loan.