Cash loans are small loans designed to help you tide over during emergencies. If your laptop has broken down and you need to get it repaired then and there and do not have money in your savings, you can take out a cash loan in 1 hour in Ireland.
Since these are short-term loans, you cannot get more than €1,000. A lender will check your affordability before signing off on a loan. Most of the lenders offer these loans with a lump sum repayment plan, and therefore, people interchangeably use them with payday loans.
Payday loans are extremely notorious, and very few lenders offer them. Some borrowers believe that lenders are using other terms to sell payday loans. Cash loans seem to be affordable because you do not have to pay down a big amount of the debt, and you can get rid of them quickly, but most of the borrowers have found the features of these loans the same as payday loans and think they are interchangeable.
You will have to read ahead to find if there is any difference between both types of funding sources.
Similarities between cash loans and payday loans
Both types of loans are short term, and they do not let you borrow more than €1,000. The repayment length is not more than a month.
Both the loans accept applications from bad credit borrowers and carry a high APR. Although they have some similarities, it does not mean that they are the same type of loans.
Cash loans are different from payday loans and here is how they are different.
When you put in the application for payday loans, a lender does not run a credit check. They just analyse your application in which you submit all your financial details like how much you earn and how much you spend every month.
Based on that information, they find out if you can afford to pay off the loan. They quickly scan your application and then disburse money within a couple of minutes after approval.
You are allowed to pay off the whole of the money on your next payday. It seems easy to settle the whole of the debt in one go, but this is the catch where payday lenders have a chance to exploit you.
It is quite apparent to understand when you cannot pay €500 out of your pocket to buy something, for example, how would you be able to pay the debt that involves interest on top of €500. You do not realise this fact, and eventually, you end up rolling over the loan. As a result, the cost of the loan keeps adding up.
Cash loans do not work like payday loans. When you put in the application for cash loans, the lender will assess your application and run a credit check.
A credit check will let them know about your previous payment records. Although they accept applications from bad credit borrowers, it does not mean that they will not check your credit score.
It lets them know your other financial obligations too that could bear on the disbursal limit. Even though the repayment length is not more than a month, you will have a chance to pay down the debt in instalments.
You will pay it down in weekly instalments. It makes the debt more manageable. Now that you have got to know how cash loans are different from payday loans. Here is how you can make these loans more manageable.
- Have a good credit score
Although bad credit borrowers are also welcome to apply for these loans, you should have at least a fair credit score.
This will help you get money at lower and more affordable interest rates. If you pay all your utility bills and debts on time, your credit score will go up.
Try not to rack up your credit card debt. It is also advisable that you should avoid maxing out your credit card to keep the debt utilisation ratio low.
- Shop around
It is always suggested that you should shop around before clinching the deal. Each lender offers loans at different interest rates. Make sure that you have studied interest rates, APR, processing fees, late payment fees, early repayment fees, and the like.
Knowing these things is crucial because you cannot compare without them. A rule of thumb says that you should choose a lender that offers these loans at a lower APR.
The bottom line is cash loans are not the same as payday loans. Although the maximum disbursal limit and the repayment term are same, a lender will run a credit check as a part of your affordability assessment that does not happen in the case of payday loans. Furthers, these loans are paid back in weekly instalments unlike payday loans.