Emergency cash options are always good to have but the number of choices can be overwhelming. Most people can identify what a personal loan from a bank entails but aren't so sure of what is involved when it comes to alternative financing.
This is a quick guide to help explain some of the differences between bank loans, installment loans, and other alternative credit options.
Alternative credit, or alternative financing, are credit options that aren't regulated within the banking system. Instead, state laws govern private lenders offering alternative credit.
Alternative loans are managed by private lending companies rather than government-regulated banks. That's a positive for those who need emergency funding because it opens credit opportunities for those with lower credit scores or none at all, those without checking accounts, those who just started back to work, and others that banks wouldn't approve.
Another key factor in alternative lending is that most don't require a credit check.
There are a few basic types of alternative credit. They are pawnshop loans, title loans, and payday loans. All can be funded with money available to you by the end of the next business day.
Pawnshop loans are loans that are secured by an item. The shop keeps the item and you can reclaim it as long as you keep on paying the monthly interest. You can't pay down the principal as with other loans. You will get the item back when you pay off the pawnshop claim.
A pawnshop loan renews every 30 days. Those who don't pay the interest every 30 days will see their item sold.
Unlike other loans, there are no questions about why you need the money or about your ability to repay. You fill out the pawn form, show your driver's license or state ID card, and take the money offered. The money offered is a small percentage of the true value of the item.
Title loans are pawn loans based on the value of a vehicle you own. They function similarly to pawnshop loans but with some additional regulations. You need a driver's license or state ID, a clear vehicle title, and the vehicle available for inspection. Some also require a checking account.
Title loans lenders will ask about your ability to repay and some may require proof of income. The amount approved for borrowing is based on your vehicle's value. The value is determined by an inspection by a loan representative.
You can keep your car as the lender only holds the title during repayment. Like a pawnshop loan, you must pay at least the interest every 30 days or your car could be repossessed. Unlike a pawnshop loan, you can also pay down the principal during repayment.
The one aspect of title loans to be aware of is that you must have a clean title. That means no one else can claim ownership of your vehicle.
Payday loans are a popular alternative credit alternative for those who need money fast. Private lenders all have different ranges of what they will offer in a payday loan with some starting at $100 and going up to $1,200.
A payday loan is expected to be repaid completely by your next payday. The amount approved with a payday loan depends on how much you earn. Along with other basic requirements like a driver's license, you will need proof of payment and typically will also need a checking account for this option.
An installment loan is money you borrow and pay back in equal installments over a fixed period, determined by the lender and loan amount. Unlike personal bank loans, installment loans are unsecured, relying solely on your signature.
When considering installment loans, it's important to recognize what they are best used for a convenient way to borrow funds and repay them in consistent installments over a predetermined time.
Installment loans offer a more structured and flexible borrowing experience compared to pawnshop loans, title loans, and payday loans. Unlike pawnshop loans that require relinquishing personal items or title loans tied to vehicle ownership, installment loans stand out for their unsecured nature, requiring only your signature for assurance.
Also, installment loans present a practical advantage over payday loans, which demand full repayment on the upcoming payday, often leading to financial strain. With installment loans, borrowers benefit from a gradual repayment approach, evenly distributing payments over a set period, providing greater breathing room for financial stability. This highlights the distinct advantages of installment loans, where convenience meets responsible borrowing practices.
If you are looking for a reputable Installment loan lender, Simple Fast Loans has loans starting at $200 ranging to $3,000. The amount you can borrow depends on the state where you live. No collateral is ever required and this lender has a flexible repayment schedule that you have some control over.
To be eligible for an installment loan from Simple Fast Loans, you need to meet several essential criteria.
These important qualifications will help you ensure a responsible and secure lending process.