Instant approval loans and credit cards can be two tempting options when you’re in need of fast cash. While the advantages of these options are very clear to borrowers, there are dangerous hidden troubles that many are not aware of. If you’re seriously considering applying for an instant approval loan or credit card, you should have knowledge of all the potential downfalls, and consider safer alternatives.
What Are Instant Approval Loans and Credit Cards:
Instant approval loans can have many names including payday loans, same day loans, and no credit check loans. Generally, they are all for short-term, high cost loans, for amounts under $1,000. The lender usually claims the loans are approved that same day or within 24 hours following application. With payday loans, the borrower must repay the loan in a single payment by the time they receive their next paycheck. Same day and no credit check loans claim to be convenient due to the lack of paperwork required. For instant approval, same day, and no credit check loans all that’s needed for approval is bank account information. Those with poor credit scores are the most likely to apply for these types of loans because lenders do not perform a credit check.
Instant approval credit cards don’t necessarily guarantee approval, but you do get a quick answer, generally within a few minutes. When an individual applies for an instant approval credit card online, the issuer runs a preliminary credit check. They also require information such proof of identity, income, employment, and balance and transfer details. As soon as the issuer receives the score and approves the application, they generally issue conditional approval as they perform an in-depth credit history review.
Downfalls to Instant Approval Loans:
Chances are, the lender knows the majority of the applications they receive are going to be from people with lower credit scores or in some kind of trouble that requires fast cash. They don’t really care about the borrower’s ability to repay the loan because there are many other ways they can make their money back, mostly through high interest rates, fees, and trapping borrowers in a cycle of debt.
These lenders can swing such quick loans because they don’t spend the time performing credit checks. Since they don’t perform credit checks, they generally charge substantially higher interest rates and fees to lower their risk of losing money if the borrower defaults. And while interest rates are regulated by state caps, fees are not, meaning they can be outrageous amounts.
Even worse than high interest rates and fees, is the risk of getting into a dangerous cycle of debt. Many with bad credit use instant approval loans as an opportunity to take out as much money as possible. This often leads to continuously taking out loans to pay for previous loans. When this occurs, people generally end up paying three times the principal.
Downfalls to Instant Approval Credit Cards:
Most people are not fully aware of what they’re getting themselves into until after they’ve applied. Many companies do not provide customers with the full details of the terms upfront before they apply online. This usually results in shock when the credit card arrives with the full list of terms, or when the first bill arrives with outrageous interest rates or annual fees. If you really need an instant approval credit card, make sure you know the full terms and rates before you apply.
Some companies claim their approval process is instant, but many issue a conditional approval as they perform an in-depth review of the applicant’s credit history. While that process takes place, the applicant is stuck waiting for the card. Once the card arrives, an additional layer of identity validation kicks in to protect banks and consumers from identity theft. The activation process involves calling from the home phone listed in the original application and verification of the last four digits of the cardholder’s Social Security number.
During the in-depth review of the applicant’s credit history, multiple credit checks may take place. Multiple instant credit checks can have a large and negative impact to credit score. Everytime a company checks your credit report, a notation is made with an agency, and companies are allowed to see how many checks have occurred over the last 30 days. If you’ve tried applying for multiple instant approval cards, regardless of approval, those checks still show up on the report. This results in the lowering of your score, and have the potential to affect your chances of getting approved for a loan or credit card in the future.
A personal loan can be a much safer option to instant approval loans or credit cards. For those unfamiliar with personal loans, they work much like auto, mortgage, or student loans, but you’re generally free to use it for whatever you desire. You can receive a personal loan from a bank, a credit union, or an online lender. You apply for your desired amount, and the lender uses your credit report and history to determine whether you qualify and at what interest rate. You can learn more about different kinds of personal loans here.
Since a personal loan is an installment loan, you get the money in one lump sum and make fixed monthly payments over time. The repayment period usually ranges from two to five years. Interest rates for personal loans generally range from 6% to 36%, depending on the borrower’s credit and the rates of the lender.
Personal Loans with TLC
At Total Loan Company, LLC the loans we make are as individual as the people who apply for them. If you need a personal loan, we can help. Application is quick and painless, and no need to worry about secret or hidden costs. With TLC you know exactly what you pay with fixed rates and absolutely no extra fees. You are with a reliable company that has 24/7 customer support and data protection.