If you are looking for a short-term cash injection – say $200 to tide you over until your next payday – what are your options? There are different ways of borrowing money depending on your needs and circumstances. For example, there are secured and unsecured loans; credit cards; and there is an instant payday loan. The following may help you find the most suitable solution for you.
The secured and unsecured loan both offer ways to borrow cash – typically involving larger sums ($500 – $1,000 upwards for unsecured lending and from around $5,000 – $10,000 upwards for secured). With a secured loan you have to provide an asset as security for the amount borrowed, and this is usually your home. The idea behind a secured loan is that if you fail to meet your loan repayments, your asset can be seized, sold, and the outstanding monies recovered. Obviously, with short-term smaller amounts of cash needed, a secured loan would not be a suitable option for you.Both types of loan allow you a set period of time to pay back the money you owe and a typical loan may be taken out for anywhere between 1 and 10 years, often longer for the larger, secured amounts. Arranging either form of borrowing can take several weeks so would not help you if you need cash urgently, even with unsecured lending.
Credit cards are a form of borrowing, with you paying back what you owe at the end of every month. If you are unable to clear the balance at this time, you will normally have a minimum amount that you will need to repay which will include any interest.
If you have credit remaining on your card, you may be able to withdraw a cash amount. However, you will usually face a handling fee (typically around 3% of the amount withdrawn or a minimum of $2-$3), plus interest charges. These interest charges will normally start to accrue from the day you draw the money out.
While this may sound easy, do bear in mind the way that some credit cards are structured. With many credit cards – but not all of them – if you fail to repay the full amount outstanding every month, then typically any repayments you do make may go towards the cheaper debt first (such as purchases made on your card), leaving you paying higher interest on the cash amount. This could work out expensive in the long-term.
With a payday loan you typically borrow a small amount of money which you repay in one lump sum, usually when your next payday arrives or the one after.
Lenders set a limit as to the maximum amount you are able to borrow, with a typical amount being around $500 (though you can often borrow higher amounts once you have borrowed and repaid a payday loan).
A payday loan is typically borrowing for the short-term – typically to meet emergencies when you are unable to stretch your income (eg for car repairs; vets’ bills; a domestic emergency etc). If you apply online, and get approved, the money could be in your bank account within two hours – or the next day at the latest. The amount you will need to repay on your instant payday loan will be agreed at the outset, so you will know exactly how much the payday loan is costing you.