Instant loans: everything you need to know
If you’re looking for an instant loan to cover an emergency or unexpected expense, here’s what you need to know.
If you’re looking for an instant loan to cover an emergency or unexpected expense, here’s what you need to know.
Instant loans
Instant online cash loans can be an easy way to get quick access to cash. But they can come with extremely high rates of interest.
Borrowing money isn’t something you should do in a rush. It’s important to consider your options before signing up for the quickest loan you can find.
What is an instant loan?
An instant loan is a type of short-term loan that enables you to borrow money instantly. Instant loans are usually for small amounts of money to cover emergencies or unexpected expenses.
The most common type of instant cash loan is a payday loan. This type of short-term loan is basically a cash advance. You can apply instantly online and, if approved, the money could be transferred into your bank account within minutes.
If you need cash in an emergency, an instant online loan may seem like the perfect solution. So, what’s the catch?
Well, for starters, the quicker you need the cash, the more it may cost you to borrow. Instant loans typically charge much higher interest than standard personal loans. And in the case of a payday loan, the money you owe, plus interest, must be paid back within a very short timeframe – usually a month.
Penalty fees for late or missed payments can cause further financial problems.
Borrowing in an instance could leave you with mounting debt and longer-term money troubles.
You can’t compare instant loans with Compare the Market.
What can an instant payday loan be used for?
If you need money instantly, it’s most likely you’ll want to use it for an emergency.
Instant cash loans are usually used to cover unexpected expenses that can’t wait, like:
- A broken boiler
- Car repairs
- A computer breakdown
- Emergency dental work
- Replacing essential home appliances, such as an oven or washing machine
- Replacing your mobile phone if it’s lost or stolen
- Last minute travels plans for a family emergency.
These may all be viable reasons to take out an instant loan. But instant borrowing should only be seen as a short-term stop gap to cover an immediate cash-flow crisis.
When should I consider an instant cash loan?
You should really only consider an instant cash loan if you need a small amount that you can pay back in the shortest time possible. An instant cash loan isn’t suitable for large amounts or if you have ongoing financial problems.
And only take out an instant loan if you’re absolutely certain you can pay it back in full, within the given time frame (which usually isn’t very long). Otherwise, you could be hit with eye-watering penalties on top of an already high interest rate. This could see your debt getting worse and your finances spiralling out of control.
What are the disadvantages of instant decision loans?
Instant loans are high interest and high risk. Failing to make your repayments won’t just lead to even more expensive debt. It could damage your credit rating, making it more difficult to get credit in the future
It’s important to consider other options before going down the instant loans route.
Disadvantages of instant loans include:
- Higher than average interest rates.
- Penalty fees for late or missed payments. These are capped for payday loans but because interest rates are so high, your debt can spiral. If you’re struggling to repay your loan, contact your lender. Whatever you do, don’t borrow again to cover the debt.
- Short loan terms – sometimes you’ll have just 30 days to pay back the loan in full.
Are there instant loans for those with bad credit?
Instant loans are available for those with bad credit, but you’ll likely be charged an even higher rate of interest.
What may seem like a short-term cash solution could get you into even more debt. If you struggle to pay back what you owe within the term of the loan, it could further damage your credit score.
Applying for an instant loan could also affect your credit score. It’s impossible to get any type of credit, including instant loans, without a credit check. The check will be marked on your credit file and may put future lenders off.
This is because instant loans, such as payday loans and logbook loans, tend to be associated with people who are struggling financially and are desperate for money.
Before you apply for any type of credit, you should try to improve your credit score. Registering on the electoral roll and paying bills on time are simple ways to help boost your score. Eventually, this could give you access to cheaper loans with better interest rates.
Read more on how to build your credit score.
You can’t compare payday loans or logbook loans with Compare the Market.
What are the alternatives to instant loans?
An instant loan isn’t the only way to access cash quickly. There are other options you might want to consider.
Personal loan
Thanks to today’s fast and improved technology and security, it can be quick and easy to get a personal loan online.
If approved, you could receive the money in your account within a couple of days (or even a few hours if you’re already a customer).
Use our loan eligibility checker to see which personal loans you might qualify for. It’s a soft search so it won’t affect your credit score.
Arranged overdraft
If you only need to borrow a small amount of money for a short period of time, a pre-approved overdraft is worth considering.
APRs for bank overdrafts typically range between 19% and 40%, which could be lower than an instant payday loan. Some UK banks even offer interest-free overdrafts up to an agreed limit – for example, the first £250.
You’ll need to apply to your bank for an arranged overdraft. If approved, it’s usually available straight away.
0% interest credit card
If you need a cash injection quickly, a money transfer credit card lets you transfer money from the card into your bank account. Many providers offer 0% interest for a set period. However, you’ll usually need to pay a transfer fee – around 1% to 4% of the balance you’re transferring.
If you want to spread the cost of an expensive purchase over several months, a 0% purchases credit card might work for you. But aim to pay off the card in full before the interest-free period ends. Otherwise, you’ll be hit with higher interest charges on the remaining balance.
If you apply online, credit card approval can take a matter of minutes. However, you may have to wait up to ten working days for your card to arrive in the post.
Compare the Market Limited acts as a credit broker, not a lender. To apply you must be a UK resident and aged 18 or over. Credit is subject to status and eligibility.
What do I need to get an instant cash loan online?
To get an instant cash loan online, you’ll need to meet the lender’s eligibility criteria. They’ll also want to carry out a credit check to determine how likely you are to pay them back.
Although criteria can vary depending on the lender, you’ll generally need to:
- Be over 18
- Have a regular income
- Be a UK resident
- Have an active UK bank account
- Be able to show you can afford the repayments.
What our expert says...
“If you need money in a hurry, an instant cash loan may seem like the perfect solution. But instant payday loans can be incredibly risky. Your quick-fix solution could easily turn into a spiralling cycle of debt that may take much longer to resolve.
Think very carefully about taking on an instant loan. Do your sums, weigh up the pros and cons, and look for alternative ways to borrow money before committing yourself.”
- The Editorial Team, Experts in personal finance, insurance and utilities
Frequently asked questions
Can I take out more than one instant loan?
Technically, you could take out more than one instant loan. But having multiple loan applications on your credit file will most likely damage your credit rating.
Many lenders won’t allow you to take out more than one loan with them. Usually, you’ll need to pay back the first loan before applying for the second one.
If you’re paying a high interest rate on multiple debts, you may want to consider a debt consolidation loan. This allows you to combine your debts into a single monthly payment plan with one interest rate to pay. However, it’s still a debt, and a longer loan term means paying more interest overall.
How quickly will I receive my instant loan?
The whole point of instant loans is they are quick. Approval can take seconds and, in most cases, the money should be in your bank account within minutes. Some lenders may take a little longer. It depends on your bank’s payment process and whether they accept instant payments.
Can I get an instant loan if I’m unemployed?
It can be harder to get an instant loan if you’re unemployed. That’s because lenders may consider you a greater risk if you don’t have a regular income.
If you’re on certain benefits and need a loan, consider a government budgeting loan. It’s interest free and the payments are taken directly from your benefits, which makes budgeting easier.
If your application is approved and you accept the loan offer online, you should get the money within seven days.
Are there any hidden fees with instant loans?
If your lender is FCA authorised and regulated, there shouldn’t be any hidden fees if you take out an instant loan, or any type of loan for that matter.
Under the Consumer Credit Act, any additional charges such as administration, missed or late payment fees should be clearly stated in your loan agreement. Default fees such as these have been capped by the Financial Conduct Authority (FCA) at £15.
If you do take out an instant cash loan, make sure the lender is authorised by the FCA and is listed on the Financial Services Register.
