The Instant Loan & why you should avoid it
In theory, the idea of the instant loan is a good one; you can emergency funds very quickly with only finance charges to pay back. In practice however, the instant loan presents more problems than it solves (in the short term and the long term).
So how does an instant loan work?
When you take out an Instant loan you are essentially taking out a high interest micro loan. Banks and other financial institutions do this kind of thing all the time, the only difference is that they are regulated and licensed by the government or another organization. Keep in mind that most instant loan companies are NOT regulated by any higher consumer authority.
When is it a good idea to get an Instant Loan?
If you really need a specific amount of cash quickly, and you know for certain that you will be able to pay it back after a week or so and don’t mind paying a little bit of interest then an instant loan is acceptable. These types of loans are good for situations where you have no other choice, but still have (or will have) the cash to back it up. For example, let’s say someone steals your bank card and empties your account; your bank (given that it is reputable) should be able to reimburse you to a certain degree, but it might take some time. In the mean time, you need to pay some bills; if you know you are going to have the money to cover the loan then it is acceptable (there may not be any other choice).
The interest rates for an instant loan vary from state to state and may range anywhere from 350% to 800%! So please remember, if you must take out an instant loan pay it back ASAP. Also, the shorter your loan term is the larger the interest rate. Some of these instant loan companies even require their customers to provide them with their bank account information! Why would anyone willingly hand their financial information over to some stranger (that isn’t even monitored by a consumer credit organization)!?
The bottom line is that you should exhaust all other possible options before resorting to an instant loan. You could try to get a salary advance, charge it to your credit card, or just borrow the money from friends. With an instant loan you can easily end up paying double what you originally borrowed if things don’t go according to plan.