You might find yourself in a situation where your bills come in faster than your paycheck even if you’re excellent at budgeting and managing your money. You might consider taking out a cash loan (sometimes called a “payday loan”) if you’re suddenly surprised by a bill. Though these cash loans are an easy way to get money quickly, they can cost you more than you might think — and you may not even realize it until it’s too late.
Let’s take a closer look at cash loans and their actual costs. We’ll explain how cash loans work and why they’re not a good idea. We’ll also show you how you can get up to $250 quickly and safely through Instacash from MoneyLion.
Overview: What is a Cash Loan?
Cash loans are very short-term loans that you can use to cover an unexpected expense. Some businesses refer to these loans as “payday advances.” These loans get their name from their short terms — you’re only supposed to have a payday loan out until your next check arrives.
There is no single definition of what a cash loan is, but data from the Consumer Financial Protection Bureau (CPFB) says that most of these loans share a few common characteristics, including:
- Available for a short amount of time (usually less than two weeks)
- Lenders often offer other fast-cash solutions (like pawnbroking or check cashing)
- Available from lenders who don’t seem to care if you have the means to pay back the loan
- Ill-defined fees, such as a “service fee” or “administrative fee”
- Very high interest rates
- The ability to “roll over” the loan and pay only interest and fees on the due date
- Lenders may expect the payment in a single lump sum instead of installments
Unlike other types of loans (like mortgages or auto loans), you can use a cash loan for anything you want. This may make cash loans tempting for people who need fast cash to pay off a bill without many barricades. Cash loans are common in low-income areas and areas where many members of the military or armed forces reside.
Most people get cash loans from check-cashing services or payday loan providers. You usually cannot get a cash loan from a bank or credit union. Depending on your state, cash loans may have regulations on how much you can borrow, the types of fees you’ll have to pay and how long the loan can be out.
How Do Cash Loans Work?
Here’s how you can get a cash loan:
- First, you’ll approach a payday loan provider or another lender who offers these types of loans.
- You’ll tell the lender how much money you need and you’ll write the lender a check for the amount that you borrow. The check you write out will also include any fees or interest you must pay to take out your money.
- Some lenders charge either a flat fee or an interest rate, but many charge both. In lieu of a check, you may also sign over authorization for your bank account.
- In exchange, the lender gives you the money you need. The lender won’t cash your check or withdraw any money from your account unless you don’t pay your bill. The lender will let you know your interest rate, any fees that are due and when you must pay back the loan.
- The lender returns your check or releases the hold on your bank account once you return and pay what you owe.
- You may have the option of “rolling over” what you owe if you cannot pay back the loan on the due date. You only pay the lender the interest and fees you owe. The lender then allows you to put off paying your principal (the amount you originally borrowed) for another period. Your principal will continue to collect interest and fees after you roll it over. Depending on your state, you may only be able to roll your loan over once or twice. In some states, loan rollovers are illegal.
Cash loans have a bad reputation because they have high fees and high interest. You might pay up to 800% in annual interest to borrow money from a payday loan provider, depending on where you live. It’s not hard to see why many people end up rolling over their cash loans when you factor in both fees and high interest.
A personal loan is far less expensive, and here’s an example of how it works. Let’s say you need to borrow $500. You visit your bank and take out a personal loan for $500. Like a cash loan, you can use a personal loan for almost anything you want. However, unlike cash loans, personal loans usually have much more affordable interest rates.
You and your bank agree that you’ll pay back your $500 over the course of a 12-month term with a 12% interest rate. The bank officer gives you $500, which you then use to pay your bills. Each month, you make a payment to the bank for $44.12 — that includes both principal and interest payments. Twelve months later, you will have paid a total of $533 to the bank and $33 over the course of one year to borrow $500.
Now, let’s imagine that you get the same loan from a payday loan provider. The payday loan provider offers you a cash loan worth $500 with an interest rate of 500% annually. The lender tells you that you need to pay the loan back in 14 days. There is also a $50 fee that you must pay to take out the loan. You authorize the lender to take money out of your account if you don’t return, and your lender gives you the $500 cash.
Fast-forward two weeks. You return to the lender to pay back what you owe. Thanks to the high interest rate you agreed to, you now owe the original $500 plus $104 in interest. You also owe the $50 service fee. You must pay the lender $654 in total — you paid a total of $154 to borrow $500 for two weeks. That’s over 4.5 times what you would have paid for your loan if you took a personal loan from a bank.
It’s not difficult to see why so many people end up rolling over their cash loans. Data from the CPFB found that 80% of people who take out a payday loan roll it over at least one time. You also have a 20% chance of defaulting on a payday loan.
Lenders often market these loans to people who are desperate for money. You might erroneously think that you have no other option to get money fast due to a low credit score or a past financial mistake. However, there are a number of options that you can use to avoid cash loans and also safely get the money you need.
What to Look for in a Cash Loan Alternative
Here are a few things to look for when you consider cash loan alternatives.
Your annual percentage rate (APR) is the percentage of interest you’ll pay over the course of a year when you take out a loan. High APRs can make your loan much more difficult to pay back. Look for a loan with a reasonable APR to avoid falling deeper into debt.
Low Or No Fees
In addition to high interest rates, expensive fees can make it harder to pay your loan back on time. Look for a lender that offers low or no fees.
Quick Signups and Deposits
Chances are that you need money fast if you need a cash loan. Look for a lender that offers instant sign-ups and deposits to get your cash faster.
No Impact on Your Credit
It’s still possible to find a great cash loan alternative if you have bad credit or no credit. Look for a lender that doesn’t require a hard check on your credit. These checks lower your credit score.
Meet the Cash Loan Alternative: Instacash from MoneyLion
Instacash is the cash loan alternative that’s easy to get and saves you money. Instacash gets you up to $250 instantly in your checking account. Essentially, Instacash lets you borrow money from your future paycheck and pay yourself back later with zero interest.
You won’t have to worry about paying any high fees, and everything you borrow is at 0% APR. Instacash advances are the stress-free alternative to a predatory cash loan with no credit checks, no interest and instant deposits.
How to Get Instacash from MoneyLion
Think that a MoneyLion Instacash advance might be right for you? Here’s how to get started.
Create a MoneyLion account
First, download the MoneyLion app from the Google Play or Apple App store. Open the app and follow the in-app instructions to create your account. Enter your personal information and upload a snapshot of your valid photo ID when prompted.
Qualify for Instacash
Follow the instructions in the MoneyLion app to qualify for Instacash. Depending on your membership, you will have a few options for accessing up to $250 in Instacash advances. And there’s no credit check!
Request Your Instacash
You can start using Instacash after you’ve qualifed. Open the MoneyLion app and navigate to the tab labeled “Finances.” From there, click on the button labeled “Instacash” and select the amount of money you need, up to $250. Choose your amount and confirm your transaction.
Use Your Money
You’ll see your cash immediately in your checking account. You can use your Instacash for anything you want. You’ll pay back only the amount of money you borrowed when your next paycheck arrives — with no interest.
Getting Fast Cash Safely
Cash loans can be tempting if you need cash fast. However, the truth is that these loans can quickly become much more expensive than you think. A safe cash loan alternative like Instacash can help you pay off debts faster and with less stress.
Are you ready to get started on the path to a better financial future? MoneyLion is here to help. Open your MoneyLion account today by downloading the app from the Google Play or Apple App store.