COVID-19 has been wreaking havoc in the UK since March 2020. Some of us are dealing with furlough some with wage cuts, while some lost their jobs altogether. The pandemic hasn’t spared a single soul.
At this point, most of us are struggling to keep up even with our day to day expenses. A small short-term loan could help bridge these minor financial gaps. If an emergency strikes and you don’t have or want to use your credit card, an instant cash advance could come in handy.
Read on to find out what cash loans are and how you can successfully apply for one.
What is a cash loan?
A cash loan is a small short-term credit that can be used to cater to immediate expenses or emergencies, which is why they are popularly referred to as instant cash advances. These emergencies can be in the form of a car repair, kitchen refurbishment or to regulate household expenses.
Cash loans are a form of unsecured credit. Therefore, you won’t have to secure an asset as collateral against the loan. Now, lack of collateral poses a greater risk to the lender in case of a default, since they have nothing to recover their money. Hence, lenders tend to set high-interest rates on these loans.
The eligibility criteria for cash loans can vary from lender to lender. Here are some basic pre-requisites that are common across all lenders:
- Be either 18 or above
- Be a resident of the UK
- Have a UK bank account
- Have proof of regular income in the UK
Although people who have neither used the overdraft facility nor a credit card might resort to this option. Credit card users refraining from increasing their credit limit may find this option feasible. These loans may be ideal for those who need a quick cash advance.
Where can I use a cash loan?
A cash loan can help you with most of your urgent expenses. If you’ve got something in the pipeline that can’t wait until your next payday, a cash loan could help you tend to it. Here’s what you can use a cash loan for:
- Car repair – emergency or accidental damage
- Emergency home repair such roofing or plumbing
- Special occasions
- To settle rental dues
- Purchase a new appliance
- To pay unforeseen medical bills
- To regulate household expenses
Cash loans can help you get past a short-term cash crunch owing to job loss or a wage cut. A cash loan will only be helpful in the long run, if you use the credit responsibly. All you need to do is ensure timely repayments for your loan. Misusing this credit will only worsen your financial condition. The last thing someone wants during a financial turmoil is debt.
How to successfully apply for a cash loan?
Much like other forms of credit, the application process for a cash loan is pretty straightforward and simple to navigate. Take a look at the steps below:
- Step 1: File an online cash loan application by filling your details, such as your address and bank account information. Then, mention the amount of money that you wish to borrow.
- Step 2: Once you’ve submitted your application, wait for the lender to assess it. The success of your application largely depends upon the accuracy of the information you’ve provided. Lenders usually run an affordability check to ensure that you will repay the loan in full. Some lenders might run a soft credit check to determine your creditworthiness. But don’t fret because soft credit checks don’t impact your credit score.
- Step 3: Now if the lender approves your application, they’ll send you a loan agreement, requiring your e-signature. Go through the loan agreement thoroughly to cross-check the loan amount, repayment amount, interest rate and fee. Read the terms, conditions and fine print with utmost attention to fully understand the terms and conditions.
- Step 4: Now that the loan is approved, you can expect a bank transfer within a few minutes or hours. Lenders often give you the liberty to choose a repayment period – monthly or weekly. You can set up a direct debit with your bank to automatically transfer the monthly repayments to the lender’s account on each payment date.
Follow these tips for better chances of loan approval
There are several reasons why a lender may deny you a loan. Here are some tips to help you successfully apply for a cash loan:
- Check your eligibility: Check whether you are eligible to apply for a cash loan:
- Be 18 years of age or above
- Be a legal resident of the UK
- Have a UK bank account
- Be an employee with proof of income
- Provide accurate information: Ensure that the information that you provide to the lender is correct and up to the minute. Fill the application with the utmost honesty and attention. Any discrepancies could have serious consequences. Lenders can decline a loan application with incorrect data. They often conduct background checks before approving a loan, and so, false data won’t go uncharted.
- Pay off outstanding debts: It is wise to settle your outstanding debt before applying for a new loan. Lenders tend to avoid borrowers with large, outstanding debt since these things directly impact your creditworthiness.
- Borrow what you can afford: Borrowing extra just because you get approved for a higher loan amount isn’t a smart move. Irresponsible borrowing will only make it difficult for you to repay the loan. And, a default in repayments will result can gravely damage your credit score.