Instant Cash Loan Pros and Cons

The market for instant cash loans is in constant flux due to constant changes in regulation of the payday loan market. A payday loan is issued based on future earnings.  For example, if your paycheck will be $500, you can secure a loan for $400 with interest before your paycheck comes. Before you agree to the terms of a cash loan, though, you should understand the may ways lenders can use these to prey on people in desperate situations.

Instant Cash Loan Pros

  • Defendants of cash loan practices point to the many individuals who need the loans to buy groceries or pay to keep the heat on in the winter. It is true: without instant cash loans, many consumers would not have the options they have to meet their financial obligations.

  • Another argument is that these loans are only available to borrowers that have pay checks to leverage. Because of this, the lender confirms the borrower does in fact have the means to repay the loan shortly in the future.

  • The loans are short-term. Very few options with bank loans allow you to secure a loan and pay it off within the same month. This fills a very narrow market gap because many borrowers do not have other methods of acquiring short-term capital.

  • The loans are provided in cash. There are not many options to actually get cash in hand from traditional lending methods. Credit cards and other installment loans cannot meet the needs of those people who need to send cash to relatives or pay rent without a bank account.

Instant Cash Loan Cons

  • Interest rates on instant cash loans are astronomical. In some states, the interest rate is capped at a certain percentage. In others, however, rates can climb as high as 35%.

  • Interest rates compound quickly and often. If you do not pay off your loan in full immediately, you can easily end up paying more in interest rates than your initial loan provided.

  • Instant cash loans can lead to a cycle of debt. Because of high interest rates and the desperate circumstances of the borrowers, it is not uncommon for borrowers to end up with thousands of dollars of pay day debt. This can be especially true when lenders allow borrowers to refinance.  The borrowers simply ends up racking up more fees.

It is always best to seek alternative options to instant cash loans. Many of these loans are provided from unsecured, non reputable lenders to the most desperate borrower.  Lenders are make large amounts of money by charging high interest rates. The consumer should only consider this loan option if they have exhausted all other sources.  A loan from a family member or friend will save the borrower money in the long run.

Also, the borrower should talk to their debtors and try to work out a finance plan or a delayed payment. Using a payday lender should be the last option because it will be expensive and can lead to desperate situations.


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