Instant Approval Loans - How Fast is Too Fast?
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In this day and age, speed seems to be increasing, attention span seems to be decreasing, and instant approval loans are becoming ever more popular, and maybe to the borrower's own detriment. The concept is simple – apply for a loan, get an immediate decision, and, in many cases, receive the funds within hours or even minutes. However, how fast is too fast when it comes to borrowing money? Particularly when in the world of finance and debt, easy-to-get loans usually correlate with high interest rates.
In this article
What are instant approval loans?
Instant approval loans are loans that provide borrowers with immediate feedback on their applications that’s why they are instant. Unlike traditional loans which sometimes may take days or weeks for approval, these loans often deliver a decision in a few minutes, and funds can be quickly transferred into your bank account. That said, this speed and convenience often come with a tradeoff—higher interest rates and fees than traditional loans. While they provide quick access to cash, the cost of borrowing can be significantly higher, leading to more expensive repayments over time.
Use AmONE to Get a Personal Loan
- If you're tight on cash right now, you may want to consider getting a personal loan. A personal loan is a loan that you can use for just about any purpose like: paying off other debt, renovating your home, or family needs like a wedding or adoption.
- With personal loan interest rates rising, now could be a great time to find a personal loan. Through our partner AmONE, you could get matched to a lender who could offer as much as a $50k loan with rates as low as 5.99% APR.
- Approval and loan terms vary based on applicant qualifications. Not all applicants will qualify for the full amount or lowest available rates. It takes minutes to see your results. And don't worry- filling out the form won't hurt your credit score and is free, so why not give it a try?
Types of instant approval loans
Instant approval loans typically come in various shapes and sizes, with the main ones detailed below:
How do instant approval loans work?
The online application process for these types of quick approval loans is pretty straightforward. The vast majority of online lenders will want some basic information such as your Social Security number, credit history, bank account details, and loan amount. When those docs are submitted, the lender will do a credit check or review your credit report through credit bureaus to determine eligibility.
The best personal loans usually depend on your credit score and financial situation. Fast funding is typically available, especially if the lender offers no credit check loans and upon approval, funds are deposited directly into your checking account.
Benefits of instant approval loans
Quick loan approval and fast cash
The key benefit here, of course, is the speed. When you need funds quickly for a financial emergency, such as a sudden car repair or a medical bill, instant approval loans can offer fast cash within hours. Even same-day funding is possible, which can be a lifesaver when you're stuck and need some quick cash in your pocket.
Accessibility for all credit types
Many lenders are willing to work with a range of credit scores, from those with bad credit to those with excellent credit. Let’s say your credit isn’t perfect, maybe you’ve missed a few credit card payments here and there. Normal financial institutions might turn you away, but online lenders offering instant approval may still provide a pre-qualification process. This means they check if you’re likely to be approved without doing a hard credit check that could impact your score.
Online application and ease of use
The entire loan process is simple and in most cases, they are fully online. No need to dress up and go to a credit union or financial institution to get in line while waiting to see if you are going to be rejected the same way you are when trying to get into a hopping club. You can be sitting on your couch in your pajamas, sipping coffee while filling out the online loan application. Within minutes, you can submit your details and get an approval process started. It’s like ordering a pizza or kabab—just a few clicks and your money is on its way.
Drawbacks of instant approval loans
Higher interest rates and fees
Instant approval loans come at a cost—high interest rates or higher APRs (annual percentage rates). Imagine borrowing $500 and getting hit with an origination fee on top of the already high interest rate. While basic personal loans from banks might have an APR of around 6-8%, these instant loans can climb to over 30% or even higher, particularly when it comes to payday loans that are unsecured with a minimal credit check required. On top of that, if you have bad credit, those rates can soar even more, making borrowing expensive.
Short-term repayment periods
Instant approval loans are often short-term loans, such as payday loans. You might have to repay the full amount within weeks or months, unlike traditional loans which may give you years. Picture borrowing $800 to cover an urgent expense, only to find out you have to pay it back in full, plus interest, in just two weeks. This can result in higher monthly payments, making it hard to pay back the full amount quickly, which might put you under financial strain.
Risk of debt cycle
Taking on these type of loans without fully considering your financial needs or ability to repay can lead to a debt cycle. You could struggle to keep up with the loan process making it hard to get on board with the repayment terms. Think of it like you are plugging a hole in a Titanic-esque sinking ship with a small piece of cloth—it works for a bit, but eventually, you might need to borrow more just to pay off the original loan, and then you’re stuck rolling over the loan, which adds more fees. This can trap you in debt for months or even years, digging deeper into financial trouble instead of resolving it when the end solution only being one option; bankruptcy.
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How to choose the right instant approval loan
Compare interest rates and APRs
Think of interest rates like the "price tag" on your loan—they tell you how much borrowing will cost you over time. Even with instant approval, don't settle for the first loan offer you see, take the time to do some research. Compare interest rates and APRs (annual percentage rates) across lenders to find the best deal.
Understand repayment terms
Before you sign a loan agreement, pay close attention to the repayment period and the terms. A longer-term loan might seem nice because it lowers your monthly payments, but you could end up paying way more in interest over time.
Assess eligibility and your credit score
Your credit score is like your "financial report card"—it tells lenders how reliable you are with money and if they can take the risk lending to you. Remember, lenders want to make sure that they get paid their principal and interest in full, and your credit score will let them know which type of borrower you are. Some instant approval loans will run a credit check, while others might not care about your credit history and instead focus on your income and employment status (these are the "no credit check" loans). Familiarity with your credit score can help you target the right type of loan for your situation and avoid taking on loans with ridiculously high interest rates.
Alternatives to instant approval loans
Visit credit unions or traditional lenders
Credit unions and banks often have lower APRs (interest rates) and more manageable repayment terms compared to online lenders. This means that if you're trying to get a loan for something like a car repair or an unexpected bill, these lenders can save you money in the long run. Although the application process might take a bit longer and won’t be instant like a same-day loan, the tradeoff is that you could secure a loan with better rates and a more flexible repayment period. Think of it like waiting an extra business day for a great sale price—sometimes, a little patience can lead to significant savings.
Borrow from family or friends
If you're unable to qualify for a secured loan (where you provide collateral) or a short-term loan from a financial institution, consider making a loan agreement with a family member or friend. This can be especially helpful if you have a poor credit score or can’t meet the lender’s eligibility requirements. However, borrowing from those close to you comes with its own set of challenges—like potentially straining relationships if repayment terms aren't clear. Make sure to establish clear terms (interest rate, repayment schedule) to prevent misunderstandings and ensure both parties feel secure about the arrangement.
Use AmONE to Get a Personal Loan
- If you're tight on cash right now, you may want to consider getting a personal loan. A personal loan is a loan that you can use for just about any purpose like: paying off other debt, renovating your home, or family needs like a wedding or adoption.
- With personal loan interest rates rising, now could be a great time to find a personal loan. Through our partner AmONE, you could get matched to a lender who could offer as much as a $50k loan with rates as low as 5.99% APR.
- Approval and loan terms vary based on applicant qualifications. Not all applicants will qualify for the full amount or lowest available rates. It takes minutes to see your results. And don't worry- filling out the form won't hurt your credit score and is free, so why not give it a try?
The bottom line
Instant approval loans can help people who need fast cash or quick funding for emergencies. But, they have risks like high interest rates, fees, and short repayment times that might trap someone in a cycle of debt if not careful. If someone is applying for a personal loan with bad credit instant approval or searching for emergency loans, it’s important to check the loan process, repayment time, and the full cost to pick the best option for their needs.
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Writer
Benjamin is a writer and entrepreneur who spent 15 years in Asis involved in the real estate and financial services industry. He currently writes about finance, real estate, geopolitics, and short stories involving his cat from Argentina named Tuki. He has written for The Motley Fool, SuperMoney, and other online and offline publications spanning the globe.
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