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Cash loans as an alternative source of funding is an excellent way to get hold of cash quickly to tide you over till the next pay check or to handle unbudgeted emergencies.
However, before applying for a cash loan, you must have the full picture of what you are getting yourself into. You need to understand the costs of the loan and how it would impact your finances.
To help you make informed decisions, we have outlined the benefits and cons of taking out a cash loan.
Today in South Africa, you can request for cash loans right from the comfort of your home or while on the go from your smartphone, since most cash loans are straightforward, easy to apply and online.
In most cases, all you have to do is visit the lender’s website, select a loan amount, then apply for the loan.
Usually, you will be required to create an account on the site. Be sure to fill in your details accurately, upload any supporting documents to expedient the processing, and submit your application.
This easy online process is a complete contrast to what you’d experience when you apply for a bank loan. Often, when you want to take out a traditional loan you will need to go to the banking hall and perhaps queue for your turn to be attended to; then, you will be made to sign a ton of tedious, boring paperwork.
You don’t have to wait for weeks to know whether your loan was approved or not. Most cash loan providers will let you know instantly about the status of your request. Others will take anything between 24 to 48 hours to get back to you on the status of your application.
Unlike traditional loan applications, where it can take upwards of several weeks to know whether you’re qualified for the loan or not.
Once your loan request is approved, you will be credited directly to the bank account you provided.
Most cash-loan lenders advertise instant pay out on their website. So, you can be sure you will get the money without delay.
No valuable asset to borrow money against? No problem. Cash loan lenders don’t need any guarantee before they approve your request.
Usually, these lenders only have to make sure you have the means to pay back the loan and the interest accruable.
By showing proof of employment and that you are expecting a pay check soon is enough to qualify you for the cash loan. You often have to have a salary with the same amount you are borrowing or more, for instance, they may require a salary on R3000 if you want to borrow R4000.
If perhaps, you are a business owner, presenting your transaction history and or uncleared invoice receivables are enough evidence to have your request granted.
Now, this is an exact opposite of the requirements to access a loan from a bank or other conventional lending services where the loan is often secured by personal property.
One critical factor driving the growing popularity of cash loan is the fact that lenders usually don’t take a person’s credit history into consideration when accessing their suitability for a loan.
Unlike bank loans where you need a good credit score to be approved, cash loans don’t check your creditworthiness.
However, keep in mind that repaying your cash loan on time won’t help rebuild your credit. Plus, you might pay higher interest if your credit is terrible as the lender would be taking on more risk lending to you.
Unlike other loans such as a car credit or mortgage where you are required to only use the money for the specific purpose of either paying for a car or house, you are free to use a cash loan as you see fit.
You can use a cash loan to consolidate all your debts into one. This way, you can better manage your debt by having to make only one payment instead of servicing several loans at a time.
Cash loans are flexible, which means you can easily find loans that meet your needs. Whether you are looking to borrow a small amount as little as R250 or a significantly large amount up to R4000, or perhaps, you want a loan with a longer payment term you can easily find the product that is best suited for your situation.
Make sure your lender follows the rules and regulations made by the NCR, which regulates the loans in South Africa.
You don’t have to spend a ton of time visiting the individual site of each lender to compare rates. Cash loan comparison websites have simplified the process for you.
All you need to do is visit a cash loan comparison website such as moneezy.com and check out the rates for many of the lenders in South Africa.
High-interest rates are probably the only downside to taking out a cash loan. The reasons, however, is not far-fetched.
Since cash loan dealers don’t require collateral, nor do they check your credit history when assessing a request, they usually take on more risk. In order to make the transaction make business sense to them, they typically charge high interest on the loans.
Another reason for the high-interest rate is because the loan is often paid back within a short time. So, before taking the credit, you may want to calculate the amount you will pay back and be sure it is something you can comfortably repay to avoid surprises.
You are usually on your own when making the decision to take out a cash loan. Lenders are not obligated to provide you with financial advisers, unlike in the bank where you will be assigned a professional who would walk you through the loan details before signing.
To wrap up it is perfectly OK to be in a situation where you need money urgently, but you don’t have it. It is part of life.
However, what is not OK is not knowing the various options available to you to get your financial life in order. Use a loan comparison site like moneezy.com to compare loans, it is free and easy to use.
Emil uses his expertise to make a difference in the financial sector. He studied at the University of Southern Denmark and has been General Manager at Intelligent Banker since 2013, where he has helped more than 500,000 users from all over the world with their financial needs.