One of the reasons that stops people applying for a loan from the High Street is being told by trainee manager who looks like he’s only just left senior school, let alone any form of further education, that their credit rating’s not good enough for them to qualify ‘on this occasion’.
At least if you’re turned down by an online lender, which isn’t very often as long as you can meet the basic criteria, it is by an automated message that doesn’t have a face and cannot see you blushing in front of it because you’ve been refused because of a poor credit rating.
So just what is the difference between the way a High Street bank appraises your finances – which you may or may not choose to put yourself through the indignity of – and the way that a instant cash loan company judges whether or not to give you an quick cash injection?
The first criteria a bank will look at is your credit score. If it is extremely poor, you will know by the expression of your ‘account manager’s’ expression as he walks back into the little goldfish bowl into which you’re ushered to discuss such meetings to deliver the inevitable bad news.
Bank lending is becoming a little less black and white, as the UK year-on-year January rise of 7% to 13% high loan-to-value mortgages suggests, so if you do have equity or other form of collateral, you may get some term of finance provided you can offer a guarantee of security. Whether you do will depend upon whether the minimum amount you have to lend in this manner is suitable for your requirement and/or whether you are willing to risk the item which you’re using as collateral.
The term of the loan may also put you off, and this is one of the key reasons that short term loans differ from traditional loans. With a bank loan, you will be paying off the debt in monthly instalments for many years. A short term loan on the other hand is usually a one-off payment, scheduled for whenever you’re next paid by your employer within a thirty-day window.
Although many instant cash loan websites advertise ‘no credit check loans’, you still have to provide proof of earnings, you bank account and confirmation that you are older than eighteen. In effect, your next pay cheque is your security, on that basis.
One other main differentiate between the two types of loan of how you agree to repay. A traditional loan will usually be repaid by direct debit or standing order from a bank account that you name. A instant cash loan, however, will extract the money from the account it delivers the initial amount to, plus the agreed interest, on your next pay day. The minute you submit the details of the bank account into which you want the money paid, you are also authorising the instant cash loan company to take its repayment.
It is important, then, that you have enough funds coming to you to cover your agreed payment amount. If not, the pay day loan repayment will put you straight into unauthorised lending with your bank, leave you with no money until your next pay day, thus leaving you in a worse position than you were before.