Loans exist to help people who are in urgent need of financial help. It’s not rare when people need immediate cash to pay for something they don’t have the money for. Loans have also evolved to cater better to the particular needs of borrowers.
One example of such a loan is the same-day loan that is commonly offered by various loan services. Those looking to apply for a quick approval loan may be interested in knowing more about same-day loans, so here’s a comprehensive guide to help you appreciate the relevance of this type of loan.
Understanding Same-Day Loans
A same-day loan or an emergency loan is a type of loan where a borrower would receive the funds on the very day they applied and received approval. Same-day loans are highly convenient, but will incur higher costs than other borrowing methods.
For example, a same-day payday loan might carry an alarming annual percentage rate (APR) of 400% fees. On the contrary, the typical 24-month regular loan comes with an average APR of 9.58%, while credit cards with interest charges come at an average APR of 16.3%.
Same-day loans will be beneficial for individuals with urgent needs to borrow money. Those without an urgent need should compare their options and opt for credit card or personal loan approval to avoid the high interest rate. As it stands, there are clear pros and cons that come with each type of loan, and the best way to decide on the type of loan you need is by considering the need and urgency.
Types of Same-Day Loans
Those new to same-day loans should do some research before borrowing, as there are several same-day loans. Depending on the loan type and lender, these loans have different terms, requirements, and rates. Here are some of the most common same-day loans.
Payday Loans
You can apply for payday loans online or in person at storefronts. This type of loan covers the borrower’s expenses until their next paycheck. Payday loans commonly only offer a small sum (under $500), and the lender will ask the borrower for a blank check. Borrowers must also bring their bank account details when applying, as the lender would need it to carry out a checking process.
Some payday loan lenders will take the borrowed amount directly from the borrower’s bank account in due time. As a same-day loan, payday loans guarantee borrowers they’ll receive their money immediately. However, a two-week loan usually comes with a $15 fee per $100 borrowed. Some lenders also have a flat percentage fee, so comparing costs and picking the lowest is helpful.
Cash Advances
Cash advances are among the most common same-day loans, as most people have credit cards. The difference between cash advances and credit card use is that borrowers will receive cash instead of using their cards to pay. As borrowers already have their data listed by the credit card issuer, they can skip the application process, so the loan process is almost instantaneous.
Like other same-day loans, the downside to cash advances is the high interest rate. There’s often an upfront fee of 3% to 5% of the withdrawal amount, with a minimum of $10. The interest rate can get as high as 24.99%.
Title Loans
Title loans are similar to payday loans in terms of its processing. Borrowers won’t have to go through credit checks and can receive their loans on the same day of the approval. However, borrowers must provide collateral in return, usually their vehicle title. They can still use their car as they’re paying their loans, but if borrowers fail to repay what they’ve borrowed, the lenders will take the collateral item as payment.
Borrowers have two weeks to a month to repay their debts, but lenders can offer rollover options. Title loans come with a 300% APR and around 25% monthly financing fees.
Installment Loans
One of the most significant advantages of installment loans over other same-day loans is the amount of money borrowers can request. Installment loans allow borrowers to request a more significant amount than title or payday loans, which they can repay in installments over several months or years.
However, the borrower must go through a credit check when applying for installment loans. This will determine the interest rate they’ll receive. Installment loans are the safest when you want to avoid debt. But, finding lenders who offer same-day installment loans can be more challenging than finding other same-day loans, so those interested would have to look around to find a reliable lender.