As much as we plan and budget, sometimes unexpected expenses come up, and that's why many people turn to short-term loans when they need quick cash. There are many reasons why people may need emergency money including medical expenses and home repairs.
If you need a short-term loan, you may find it overwhelming how many options there are. To help, I conducted extensive research on each type of short-term loan including the pros and cons of each.
Choosing the Right Short-Term Loan for You
There are several key factors to consider when deciding which short-term loan you should get including:
- The loan amount
- Interest rate and/or fees
- Length of payback time
- Credit and income requirements
The most important factors are the interest rate and/or fees because you want to spend as little on the loan as possible. Some short-term loans have a one-time fee rather than an interest rate, and some require both.
Payday Loan
The maximum loan amount for a payday loan varies by state. The average payday loan limit is $500, but some states allow up to $1,000. The biggest advantage of a payday loan is that you receive the money within 24 hours. Another advantage is that most payday lenders don't make credit decisions off your credit history alone, so you will still qualify if you have poor credit.
However, if your credit is below poor, or non-existent, or you've been denied a payday loan in the recent past, it might be a good idea to apply through a matching service like GreenStarCash. Matching services usually send your application data to dozens of direct lenders at the same time, so your chances of getting approved are much higher than when applying to lenders directly.
You need three things to get a payday loan:
- An ID to show you are over 18
- A bank account or prepaid debit card
- Verification of income such as a pay stub
You won't make monthly payments on a payday loan. Instead, you will be expected to pay it off in one payment when you receive your next paycheck. Some payday loans allow you to renew the loan, but this may incur additional fees. Because payday loans don't have monthly payments, they don't have an interest rate. You will pay a one-time fee of between $10 and $30 for every $100 borrowed. This steep fee is the biggest disadvantage of payday loans.
Installment Loan
An installment loan is a traditional type of loan used for purchases such as a mortgage or auto loan. You can also get a personal installment loan for emergency situations. You will make fixed monthly payments on the loan for a predetermined amount of time. One of the benefits of an installment loan is that you can typically borrow a larger amount of money than you can with a payday loan.
The biggest downside of installment loans is that a credit check is required. You may not qualify if you have bad credit or no credit history. If you do qualify, a low credit score usually means a higher interest rate. However, you can often use a co-signer if your credit is low or you don't qualify on your own.
Different lenders have different installment loan requirements depending on the state they are offering services in. Lenders like CASH 1 Loans offer fast, easy, and hassle-free installment loans that you can easily repay over more time with low payments.
With an installment loan, it may take longer to receive the money than it would with other types of short-term loans.
While installment loans can be paid off early, sometimes this requires an additional fee.
Car Title Loan
As the name suggests, a car title is a loan that requires you to offer your car title as collateral. This means that if you can't repay the loan, the lender may repossess your car. Therefore, you should only get a car title loan if you are certain that you can repay the loan in the time allotted. Loan periods are usually a month or less with the possibility to extend the loan for an additional fee.
If you currently have a large car loan, then you likely won't qualify for a car title loan. You must own your car outright or have it mostly paid off.
The advantages of a car title loan are that you can often borrow more money than you would with a payday loan. You may be able to borrow up to 50% of your car's value. However, car title loans aren't cheap. You will pay a fee of up to 25% of the loan amount.
Cash Advance on a Credit Card
Cash advances from credit card companies usually come with a high interest rate. The interest rate on cash advances is often higher than the interest rate for regular purchases on your credit card, so make sure to check the specific cash advance interest rate and limit. You can find this information on your latest credit card statement.
The advantages of a cash advance on a credit card are that you can take your time paying it off, and you can borrow more money if needed as long as you haven't reached the limit for that card.
Closing Remarks
For quick cash with no credit check, a payday loan is your best option. If you can wait a few days and have good credit, consider an installment loan as they often have lower fees. Lastly, if you aren't sure how much money you will need, a credit card cash advance may be the best option for you.