If you find yourself in a financial quagmire, an instant loan might be your safest bet. Most instant loans are merely payday loans, which come with a set of eligibility requirements, just like other ordinary loans. Furthermore, even after their approval, payment isn’t always guaranteed since their acquisition requires meticulous attention to detail, specifically if you’re applying for online loans in Canada.
To improve your chances of securing online payday loans, you have to take the necessary steps, such as clearing your outstanding debts and gathering relevant documentation.
In this comprehensive guide, we’ll walk you through the process of applying for an instant loan online. This way, you have the tools, resources, and knowledge to take the best course of action.
Things to Consider Before Applying For An Instant Loans
The reality of payday loans is head and shoulders different than advertised. Instant loans are not always “instant,” despite what their name suggests. Specifically, the online application to secure them is lengthy, and the lender may require a few hours to a few days to approve your request and deposit funds. Furthermore, if you submit your application on a Friday, you might not get your funds until Monday — the next business day.
It’s also important to know that instant loans come bearing high-interest rates. Most instant loans are marketed as cash advances, which have a longstanding reputation of coming with chunky fees that yield unreasonably high APR values.
The Consumer Financial Protection Bureau reports that instant loan lenders charge $15 on a loan of $100. This means that your APR value falls in the range of almost 400% on a two-week loan. Further, some instant loans are even heavier on the pockets, with APRS reaching as high as 900%.
When Should I Apply for an Instant Loan?
Even though payday loans have high-interest rates, if you’re capable of repayment and have done your research, there’s no reason you shouldn’t turn to them on a rainy day.
However, keep in mind that instant loans aren’t meant for hefty purchases. If you want to fund a kitchen remodel or invest in a home renovation project, perhaps a bigger loan might be in order. With an instant loan, you’ll get a couple of hundred dollars, which are better spent on emergencies.
Furthermore, make sure you can pay back your loan within two weeks, or at least until your next payday. These are the usual deadlines most lenders are willing to extend to borrowers.
How to Apply For An Instant Loan
If you think an online instant loan fits your financial profile and situation, follow these steps.
Step 1: Check Your Creditworthiness
In the case of any loan, you have to make sure you’re eligible for the loan. The first and foremost eligibility criteria are your credit score.
Whether you qualify for an instant loan or not will depend on your creditworthiness. This creditworthiness will also determine the interest rate on your loan, and other terms and conditions.
You can calculate your credit score by assessing your financial numbers in five key areas — new credit, credit mix, length of credit history, amounts owed, and payment history.
While this score may vary across lenders, FICO provides a ranking system of different creditors:
- Excellent credit: 740+
- Good credit: 670 to 739
- Fair credit: 580 to 699
- Poor credit: Less than 579
If you think your credit score is not up to the mark, you can take several steps to make amends, which we’ll discuss below.
Step 2: Get An additional Credit Report Sanctioned
Credit scores don’t paint a complete picture of your creditworthiness. A full credit report is a more comprehensive portrait.
You can easily get your credit report from reputable credit bureaus. These bureaus also provide you the option of one free copy of the report per year. In the report, your creditworthiness is analyzed based on your assets, liabilities, debts, and payments.
This detail provides lenders with a deeper insight into your financial standing. Furthermore, when in-depth credit calculations are good for you, you’re in a better position to focus on the areas you’re lacking in and take steps to remedy them, improving your financial performance.
Step 3: Make Timely Utility Payments
If your credit score is below par, the first thing you have to do is make your payments on time. Not only will this increase your score, but it’ll also validate your past credit history.
Taking measures like these to improve your creditworthiness will have an impact on your long-term financial happiness as well.
Step 4: Clear Existing Loans
You can take two instant loans at the same time, but it’s not recommended. If you want to make sure that you’re in a better position to land loans in the future, you have to deal with the loans that are already looming over your head. Piling a burdening heap of loans is only going to put you under a lot of financial pressure.
If you’re short on your repayments, don’t make the mistake of signing up for a payday loan solely to pay another lender. This can potentially lead to a vicious cycle of debts, which may be hard to break free.
In such delicate matters, seeking advice from an impartial debt service can help if you’re feeling out of sorts.
Step 5: Reflect Your Regular Income Accurately
The financial institution you decide to deal with will have a thorough look at your employment, income, and account details. Good lenders need to know you have a stable job in a place that enables you to earn enough for repayment.
While your credit score is the primary marker, lenders also put an emphasis on your income to verify your financial past.
Step 6: Decide How Much To Borrow
Now that your credit score is out of the way, you can move to the next big step — deciding how much to borrow. Before you compare lenders, you have to be sure how much you can afford to loan. Lenders may offer to lend you more than you can handle, but it shouldn’t tempt you. You don’t want to be hopeless and cornered in a debt trap.
Carefully consider where you stand in terms of your finances before taking any drastic steps. Review your finances and come up with a pragmatic answer as to how your financial future looks like and how important factors, like credit score, will affect the cost of your instant loan.
Consider the loan you’re going to take, and whether you’ll be able to pay it within two weeks. While lower loans, like instant loans, are relatively easier to pay back, you have to consider that they come with higher interest rates, which can lead to complications.
Factor all of this into your final equation, then make an informed decision.
Step 7: Know Your Consumer Rights
According to the Truth in Lending Act, you’re subject to certain rights while securing loans. The act makes it obligatory for lenders to disclose fees, amount financed, APR, penalties, and the complete payment of the instant loan.
If a lender refuses to provide you with this information, this means it’s flagrantly violating your rights, and you should find some other company that can be trusted.
Step 8: Gather Documentation For the Loan Application
In addition to your creditworthiness and employment details, a lender might also want to verify your debt-to-income ratio. Furthermore, you might also have to divulge other information, such as your Social Security Number (SSN), whether you’re living on rent or own a place, the duration of your employment, the name of your employer, and your monthly housing payments. Keeping this information at your immediate disposal can fast-track the entire process, whether you’re applying for a personal or online instant loan.
If your credit score doesn’t meet expectations, you might have to involve a cosigner. If this is the case, make sure you get your cosigner up to date with detailed risks and requirements of the loan in question.
Step 9: Research Loan Options
This is the easy part: comparison shopping for different loans. When you apply for an instant loan, it prompts a hard inquiry into your credit report, which pushed your credit score down a tad-bit. So, before you consider a loan, it’s important to find everything there is to know about the terms and criteria of potential loaners.
To save valuable time, call up a lender of your preference, and ask what minimum score they require in advance. You can even get your hands on this information from their websites.
Another great place is your bank or credit union. These institutions know what the general minimum requirements and whether you meet the standard requirements of lenders or not.
Here are some details you need to research when you’re applying for an instant loan.
- Nature of interest: Is the interest variable or fixed? Simple or precomputed? Knowing these nuances can give you a clear idea of the total repayable amount.
- Is the loan secure or unsecured?
- What penalties will you deal with if you’re late on payments? Do you have to pay an origination fee for the loan? Are there any other fees that you need to take care of?
- Fine Print: Financial advisers always have some fine print hidden somewhere. Carefully go through it. Find out how a lender deals with arbitration and what ACH term it offers.
You should also keep your eyes open for red flags that might indicate fraudulent activity. First, make sure that your lender is registered with your state and has enough reassuring business information listed on the website that doesn’t provide any indication of debt-traps or scams.
Step 10: Apply For Pre-approval
Many financial intuitions, including credit unions and banks, gives the option for preapproval. Availing this option gives you the unique opportunity to evaluate your loan terms and possible interest rates based on your financial credentials. This also gives you the added advantage of comparing multiple offers and deciding which suits best.
Step 11: Apply For A Personal Loan
After finalizing your research and narrowing down your lender, it’s time to put a final stamp on your application. Set aside time to review your application, and proofread for typos, errors, and mistakes that might affect your chances to qualify for the loan. In most cases, you’re informed whether you’re going to be liable for an instant loan or not. In a day or two, you’re certain whether your needs are going to be taken care of or not.
Although not recommended, but if you still end up deciding to apply for multiple loans, consider presenting your applications as one so that hard inquiries into your credit score and other financial details are considered as one, and don’t result in unneeded scrutiny.
Many people only resort to an instant loan when they’ve exhausted all other options and have nowhere else to turn to. However, as tough times can always catch you by surprise, it’s better to prepare ahead and keep your finances and credit score in order.
There are many steps you have to take before you can meet the eligibility criteria for an online instant loan.
You must research and compare shop for different loan options to find one that matches your financial profile the most. You have to verify your creditworthiness, and if it’s not right, you have to pay outstanding debts, utility bills, and take many other measures to tip the odds in your favor. Knowing your rights as a lender is another important factor to consider. This information will help you weed out the trustworthy lenders from the scams and frauds.
You also have to consider that instant and payday loans can’t help you finance massive projects, such as home remodels. They only amount to several hundred dollars, come with high-interest rate requirements, and subject the borrower to repayment within two weeks. Also, before applying online, make sure you avail the preapproval facility most lenders offer to double-check your documentation and financial standing.
So, before starting the online application process, you have to evaluate these factors before jumping to conclusions and make sure you’re building a solid case for yourself. This is your responsibility as a responsible borrower.