Much has been said about the meteoric rise of quick online loans over the past few years, but while some consumer advocates have been cheering the demise of the market, questions have also been raised about where the most vulnerable households might turn to make ends meet given the falling number of lenders.
The clampdown on the industry means there are now relatively few short-term lenders, and with rising inflation and the cost of living crisis, there will be pinch points where many consumers need access to fast credit. However, their options will be limited. There were hopes that non-profit community lenders such as credit unions could step up and plug the gap, but they are still relatively few and far between and they tend to keep a low profile, so many people don’t even know they’re out there.
When are quick loans a viable credit option?
Quick loans, typically repayable within one to six months, can be an expensive way to borrow money. The interest rates can be high and they vary considerably from one lender to the next, so it’s always important to shop around. But despite their expense, they serve a genuine purpose and they can be a viable option in certain situations.
One of the benefits of quick loans is that they’re easy to apply for. Rather than having to contact your bank, you can complete a simple online process in minutes without having to send off any paper documents. This makes the process quick, with instant loan decisions and the money in your account within a day in some cases. The loan terms can also be very flexible, giving you control over how much you borrow and for how long.
These benefits can make quick loans a viable credit option for unexpected expenses that you can’t afford to pay in full. For example, if your car breaks down or you have to pay for your child’s nursery but don’t get paid until the end of the month, a short-term loan could help to bridge that gap.
The risks associated with quick loans
Although there are some genuine uses for quick loans, they should also be approached with care. While they are convenient, quick loans will rarely be the cheapest form of credit available to you. The ease and availability of quick loans can also be habit forming, with some borrowers opting to use quick loans for non-essential items.
There are also risks associated with the repayments. With typical loan terms of just a few months, if money is tight or you receive an unexpected bill, you could struggle to make the repayments. If you miss or are late on a payment, it can also damage your credit score, making it more difficult to source affordable credit in the future.
What are the alternatives to quick loans?
There are many viable credit options out there to suit different needs. While there are some situations when a quick loan might be the right fit for you, there are also many other credit products you should consider first. Overdrafts, credit cards and personal loans over a longer period are all options worth exploring. This Wonga guide to quick loans explores a few other quick loan alternatives that could give you access to the cash you need without the associated risks.
While we realize the irony of linking a guide from an online loan company to help you explore the alternatives, we felt like the Wonga guide has too much useful information not to share. Not only can you check out a list of alternatives to quick loans but you’ll also see guidance on how to improve your chances of a successful loan application and many other useful loan based FAQs with direct insight from the lender’s perspective.
The bottom line is: quick loans are useful, accessible and subject to greater legislative controls than at any previous point in their history. However chances are there is still a safer credit option available to you that you should explore first before committing to on