We all suffer from unexpected events that disrupt our domestic finances. A vehicle that needs repair, an appliance that breaks down, an unexpected bill... Sometimes, we do not have enough liquidity to meet these types of expenses. What solutions do we have to obtain financing in these cases? So-called quick loans can be a lifesaver in a timely matter, as long as we study the conditions carefully.
To avoid unexpected complications when taking out this type of financial product, at Hipotecas.com we tell you what quick loans are, what their requirements are, what advantages and disadvantages they present and what you should take into account if you are considering applying for one.
What are quick loans?
Quick loans are personal loans that allow citizens to obtain moderate amounts of money based on a personal guarantee and under granting requirements that are, a priori, less demanding than in a traditional loan, but with repayment conditions that are less favorable for the client.
According to Facua in its report Quick loans , they are “ an alternative means of financing consisting of making small amounts of money available, with short repayment periods and at higher interest rates than traditional loans, granted to respond to specific and urgent liquidity needs, which are associated with the speed in their granting and provision, as well as the lack of requirement of guarantees for their granting”.
Although we normally associate quick loans with online or telephone financing companies specialized in this type of product, some conventional financial institutions offer this type of credit , generally to clients who appear in their databases as profiles with sufficient payment guarantees.
Conditions for granting
The main characteristic of quick loans, as their name suggests, is the agility with which financing can be formalized, since within 24 or 48 hours it is possible to have the money .
Likewise, the requirements demanded by the entity for approval are more relaxed, normally requiring the payroll or pension of the interested party, their ID and bank account and not being listed in any register of defaulters , without the need to justify the destination of the credit.
In exchange for this speed and ease, the borrower has to face high interest rates, which can range between 20 and 25% APR, and repay it in shorter repayment periods, generally between 30 days and 60 months, depending on the amount requested and the conditions agreed with the entity.
In any case, quick loans do not have any specific regulation or legal treatment applicable, being governed by Law 16/2011, of June 24, on consumer credit contracts , provided that they exceed 199 euros. Therefore, in practice, it is possible to find heterogeneous conditions in the offers.
Advantages and disadvantages of quick loans
Quick loans have both advantages and disadvantages. Regarding the pros of this financial product , the following stand out:
- The brevity in accessing the requested amount , with the average maximum period being 5 days.
- The flexibility to set terms and installments , allowing the borrower to decide, in many cases, how long it will take to repay the amount owed and how much they will pay each month.
- Simplicity in processing , reducing to a minimum the documentation required for granting credit.
- The absence of the need for guarantees , provided that the amount does not exceed a certain amount (around 10,000 euros).
- They do not entail a mortgage guarantee , that is, there is no asset directly affected by the contract, so the lender will not be able to proceed with the execution of a mortgage guarantee, regardless of whether the lender can assert its right as a creditor in a judicial procedure, seizing the debtor's assets.
- They do not require justification as to how the loaned amount will be invested.
- As a general rule, they do not require the purchase of other associated financial products , such as insurance or savings products.
- They are suitable for both individuals and companies .
However, quick loans are not without their drawbacks :
- They involve high interest rates , which usually vary between 18 and 22% APR. However, there are companies that offer quick loans at 0% APR for first loans.
- The amounts that can be granted as credit under this formula are small; they generally range between 500 and 6,000 euros and do not usually exceed 10,000 euros.
- In case the requested amount is higher, the lender may require guarantees from the client .
- Although the requirements are minimal, it is essential to have a constant source of income , such as a payroll, pension or proof.
- They are not usually granted to people who appear on a list of defaulters , regardless of the amount they owe, although due to high competition, some companies eliminate this requirement.
- Depending on the company you contract with, the contract may include abusive clauses , high commissions or imago penalties that generate over-indebtedness.
- Quick loans for less than 199 euros are completely lacking in an applicable legal framework , which is conducive to the emergence of fraud.
Tips before opting for a quick loan
As with any financial product, it is essential that before taking out a loan we are informed of the conditions of these loans and that we know the obligations and consequences before taking out a quick loan.
In this regard, before purchasing this product, it is important to take into account the following tips :
- Look for alternatives that allow us to obtain cash (such as asking for help from family or friends), since the high interest rates on these quick loans entail a significant expense in interest that is best avoided.
- Compare the different proposals that exist on the market, both from online financing companies and traditional financial institutions.
- Confirm the legitimacy of the lender , to avoid being victims of possible fraud or scams.
- Never ask for a quick loan to pay another loan , as this only increases the debt and makes payment difficult in the medium to long term.
- Study how much is the minimum amount of money that we need , without accepting financing offers higher than that amount.
- Evaluate whether we will be able to repay the amount within the agreed period - because we are going to receive a salary, for example - since even if a guarantee is not required, any non-payment activates the debtor's liability principle, which establishes that the debtor is responsible for his obligations with all his assets, present and future.
- Read the loan conditions carefully , checking that there are no abusive clauses in the text.
- Restrict its use to unforeseen and unavoidable situations, avoiding using this form of financing as a regular method if we do not want to end up in a spiral of debt.