About Instant Approval Personal Loans

By John Walton

  • Overview

    Difficult economic times often mean the double whammy of more people needing credit at just the time that credit is hard to get. This means sometimes even people with good credit must look at sources for loans that they otherwise would choose to avoid. Personal loans can sometimes be a good source of much-needed cash, but buyers should beware and do their homework, especially in the case of the instant personal loan.
  • Identification: Unsecured Credit

    Personal loans are a form of unsecured credit, meaning they are not backed by collateral. Personal loans once were the primary form of unsecured credit, so unsecured credit was synonymous with "personal loan." The rise of the credit card as the primary form of unsecured credit in America put an end to that perception.
  • Standard Personal Loans

    Unsecured loans are usually based solely on the credit rating of the borrower. This makes getting one from a bank often more difficult as there is no collateral and the risk to the bank is correspondingly greater. After all, the better your credit rating, the less likely you would need a personal loan. Furthermore, most banks are also now in the credit card business, and a small, closed-end installment loan is not as profitable to them as the revolving credit of a credit card, and the interest rates on credit cards are generally higher than for a normal personal loan. However, for the consumer who has the time to shop for one, and can get one, this is the best way to borrow money for substantial, one-time expenses.

  • Instant Personal Loans

    Sometimes a borrower simply does not have the time to do the legwork, shop around in person at banks, and try to strike a deal on a personal loan. The Internet has granted access to a financial product called the instant personal loan. Gaining access to this kind of credit is usually pretty easy, since a credit check is rarely required. However, qualifications for approval often include regular employment and income. Once these two matters have been verified, the loan is given. Some lenders may require a phone conversation to clarify final issues before confirmation. Sometimes this can be done on the same day as the application, so while not quite "instant," it is very quick. Interest rates on a legitimate personal loan of this type should be less than or equal to a credit card rate, which is appropriate since they are fundamentally the same form of credit.
  • Warning: Payday Loans

    Unfortunately, many forms of instant personal loan on the Internet are little more than an online version of the old-fashioned payday loan. Payday loans are also unsecured, but far more predatory. The interest rates vary with local law, but expressed as an APR, they can range between 400 to 800 percent. Credit reports are never a consideration for loans of this type; given their disadvantages, they should never be sought by people with other alternatives.
  • Expert Insight

    Legitimate personal loans should only be considered for major, one-time expenses: fixing a car, consolidating credit cards or paying a medical bill. Borrowers should do their homework, and getting your own credit report even if you are going the instant personal loan route is not a bad idea. The terms of these loans should be viewed as a process of negotiation, and knowing your own standing is invaluable to getting a good deal. Avoid borrowing more money than you actually need, and compute how much you will eventually repay by the end of the loan: if you take smaller monthly payments than you can afford, then your loan will be for a longer term and you will ultimately pay more in the long run. Payday loans masquerading as instant personal loans should not be considered unless no other access to credit is available. Virtually any other means of raising cash -- borrowing from friends or family; pay advances; title loans and pawn shops; and credit cards -- are better for the borrower than this highly predatory practice.
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