Summary
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 more unfavorable repayment conditions for the client.According to Facua's report, "Quick Loans ," these are "an alternative means of financing consisting of making available small amounts of money, with short repayment periods and 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 making available, as well as the lack of requirements for guarantees for their granting."
Although we usually associate quick loans with online or telephone financing companies specializing in this type of product, some conventional financial institutions offer this type of credit , generally to clients who appear in their databases as having sufficient payment guarantees.
Conditions for its granting
The main characteristic of fast loans, as their name suggests, is the speed with which financing can be formalized, since it is possible to have the money available within 24 or 48 hours.Likewise, the requirements demanded by the entity for its 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 defaulter registry , without needing to justify the purpose 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, payday loans are not subject to any specific legal regulation or treatment , being governed by Law 16/2011 of June 24, on consumer credit agreements , provided they exceed €199. Therefore, in practice, it is possible to find a wide variety of terms and conditions in the offers.
Advantages and disadvantages of quick loans
Quick loans have both advantages and disadvantages. Among the advantages of this financial product , the following stand out:- The speed with which the requested amount can be accessed , with the maximum average term being 5 days.
- The flexibility to set the terms and installments , allowing the borrower to decide, in many cases, how long it will take to repay the amount owed and how much to pay each month.
- Simplicity in the processing , reducing to a minimum the documentation necessary for granting the 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 involve a mortgage guarantee , that is, there is no asset directly affected by the contract, so the lender cannot proceed to enforce a mortgage guarantee, regardless of whether he can assert his right as a creditor in a judicial proceeding, by seizing the debtor's assets.
- They do not require justification on how the borrowed amount will be invested.
- They do not generally 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:
- These loans carry high interest rates , typically ranging from 18% to 22% APR. However, some companies offer quick loans at 0% APR for first-time borrowers.
- The amounts allowed to be given on credit under this formula are small ; they generally range between 500 and 6,000 euros and do not usually exceed 10,000 euros.
- If the amount requested 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 payslip, pension or proof of income.
- They are not usually granted to people who appear on any list of defaulters , regardless of the amount they owe, although in the face of high competition, some companies eliminate this requirement.
- Depending on which company you contract with, the contract may include abusive clauses , high fees, or penalties for late payments that lead to over-indebtedness.
- Quick loans under 199 euros completely lack an applicable legal framework , which fosters 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 terms and conditions and understand the obligations and consequences before formalizing a quick loan.In this regard, before purchasing this product, it is important to consider the following advice:
- Look for alternatives that allow us to obtain cash (such as asking for help from family or friends), since the high interest rates of these quick loans entail a significant expense in interest that is best avoided.
- Compare the different proposals that exist in the market, both from online financing companies and from traditional financial institutions.
- Verify the legitimacy of the lender , to avoid becoming a victim of potential fraud or scams.
- Never take out a quick loan to pay off another one , as this only increases the debt and makes it harder to pay in the medium to long term.
- Assess whether we will be able to repay the amount within the agreed timeframe - because we are going to receive our paycheck, for example - since even if no guarantee is required, any non-payment activates the principle of debtor liability, which establishes that the debtor is responsible for their obligations with all their assets, present and future.
- Carefully read the loan terms and conditions , 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.
