The issue with the internet is that it gives you everything – from the good, the bad to the crazy. Be it dog training, muffin making or getting a date, we could stay home all day surfing the net and still get things done. The same goes for borrowing money.
With the myriad of online cash loans out there, you can avoid the uncomfortable situation of asking your family or friends for a loan.
However, in all honesty, it’s only when you’ve a good idea of the ins and outs of taking out fast cash loans online, have no other alternatives of borrowing and you can’t wait until your next payday that loans online might be viable borrowing options.
Let’s start by taking a look at some of the most common cash loans available online.
What: Instant payday loans are short-term personal loans of between $100 and $1000. As the name suggests, these quick cash loans are generally due on your next payday.
Good for: household repairs, utility bills, rental, medical emergencies, funeral expenses.
What: these are secured cash loans where the borrower’s possession is held by the online lending companies as collateral. In the US, car title loans are very common. A professional from the online lending company will inspect the condition of your car at your house, take pictures of it and then collect the original vehicle title.
As long as you make prompt repayment, you can continue driving your car without having to turn it into the lending company at all.
Good for: people who have a car and a regular monthly income as loan repayment will usually be on the next payday. As title loans are secured, they generally have a lower interest rate than unsecured loans such as payday loans.
What: this consolidates multiple payday loans into one simple monthly repayment at a new interest rate. The debt consolidation company will negotiate with the online lending company on your behalf for a new repayment timeline and monthly amount.
Generally, people are able to repay all outstanding debts with the help of payday consolidation within six or 18 months.
Good for: letting a professional help with negotiation with online lenders. This way, you don’t have to deal with stressful and complicated negotiations yourself and can be rid of the endless debt collection calls. Moreover, with different debts consolidated into one, you now have only one new repayment schedule to keep to instead of several ones.
What: these are fixed-amount loans which people borrow and repay a fixed monthly sum over the loan tenure.
Installment loans are usually for larger amounts as their tenures are spread over an extended period of time. One thing to note when considering an installment loan is that the lender will check your credit history, employment arrangement or personal background to determine whether you’re able to make monthly repayments on time.
Good for: big-budget items such as cars, homes, education or luxury goods.
Merchant Cash Advance
What: Usually lasting for only a few months, these short-term loans for business owners are useful when they’ve difficulty finding funding elsewhere. Repayments are made daily from a fixed percentage of the business’ credit card receipts. So, the daily repayment amount will be lower should the credit card sales for the day are lower and vice versa.
Good for: business owners who want to secure funding quickly without having to deal with time-consuming red tape which application for a business bank loan would have. Moreover, since the daily repayments of merchant cash advances are proportional to daily sales, the business owner can breathe a little easier as he doesn’t have to meet a fixed repayment amount which is prevalent in most bank loans.
Money can be a troublemaker, especially if you don’t know how to control it. With such an array of online cash loans claiming to solve different needs, it’s important that you, the potential borrower, are well aware of borrowing pitfalls before committing to an online lender.
Errant Online Lenders
Just as there are imitation luxury goods, there are unscrupulous online lenders who may not be doing what they promise. Some may skip explaining the finer points of borrowing to take advantage of their customers’ desperate need for money.
Others may grant unlimited credit to borrowers with bad credit history and then sell the borrower’s personal information to collection agencies when they spiral into a debt trap and couldn’t pay up.
What to look out for in legitimate online lenders
Many online lenders dangle the carrots of ‘fast cash’, ‘no credit checks’ or ’24-hour approval’ on their websites. You’re fully responsible for doing due homework and making sure that you’re really dealing with a reputable online lender with a physical office, a working phone number and a team of human consultants to manage customer’s queries.
Look up the address in the business directory or make a call using the phone number displayed on the website. If the other line sounds dodgy or have difficulty speaking good English, run!
Inquire about APR (Annual Percentage Rate)
When borrowing, a loan’s APR represents the real annual cost of a loan inclusive of interest, any processing fees or costs involved expressed as a percentage number.
For instance, if the rate of a loan is 25%, this means the borrower will have to repay $25 for every $100 borrowed.
When taking out an online loan, you should do yourself a big favor by asking the online lender about the loan’s APR instead of just its interest rate.
That’s because some slick online lending companies may dazzle the prospective borrower with a whole host of figures, at times not even quoting the advertised rates at all. Given so many different rates by various online lenders, how do you determine which is the cheaper loan?
The APR can let you know the real cost of taking out a certain loan save for its limitations for some mortgage or credit card loans. To calculate a loan’s APR and decide which loan to take up, the borrower may use an online APR calculator.
Now that the APR has been calculated, take into consideration some ‘what if’ situations such as early loan repayment, opting for a lower interest rate or negotiating for lower closing costs to see how the APR will change. By playing around with these figures on the online APR calculator, you’ll get a clearer picture of what you should be looking out for in the various quotations from online lenders and what aspects of a loan (eg. lower closing costs, shorter term) you can be negotiating for.
You should also be aware that some online lenders may request you to pay ‘registration fees’ or some other fees first via Western Union or other quick funds transfer services. You should never pay for anything before you receive your cash loan. Spend a little more time going through several more online lending websites and request for quotations.