When Would Getting Urgent Loans Be a Bad Idea?

Urgent loans, as the name suggests, are loans you take out at the time of emergencies. Unforeseen expenses can catch you off guard at any time. Many people become floored and struggle to address them, especially if they are already in a tight spot. Inflation has slackened its grip, but be that as it may, the cost of living is high.

When you are caught unawares by an emergency, quick loans with no guarantor seem to be the best bet. You can quickly get money, all but within the same day you put in your loan application and no headache of having your credit history checked, so there is no fear of losing your credit points. That sounds wonderful, but these loans are extortionate and paid back in a lump sum on the due date. Falling behind on payments will keep rolling over the loan, making it a big debt to tackle.

It is always advisable not to throw caution to the wind when you are seeking urgent loans. Even though a lender promises to peruse your repaying capacity before giving the green light to your application, you cannot abnegate your responsibility because, ultimately, the onus is on you to ensure you do not owe more than you can afford to pay back.

Here are some situations when it is not a good idea to take out an urgent loan:

• You cannot pay back the debt on time

Though the payment sum will not be so big, do not forget that it will burn a hole in your pocket. There is no source from where money will come in that you have to pay on top of what you borrow, which includes fees and interest.

These are not instalment loans that you can fit into your budget by chipping away at your regular expenses. These are repaid in full once and for all. For instance, if you have borrowed €100 at an interest rate of 0.8% per day for 14 days, you will have to pay €111.2.

Since your pocket did not allow you to cover €100, it can be difficult to arrange cash worth €111.2 in just a two-week period. Once you fall behind in payments, this amount will continue to add up.

Use an online calculator to know the estimated cost of debt and then figure out if your budget can fit this expense without compromising on your necessities. Do not fight shy of cutting back on your discretionary expenses to accommodate such expenses.

If you find that your budget will blow up, you should drop the idea of using these loans. Instead, you should seek help from your family and friends. You can at least avoid paying interest and seek a bit longer time.

• You are not buying for emergencies

Though these loans are all-purpose loans, it does not mean that you can use them to fund regular purchases and impulsive buys. If you do so, you are making a big mistake. These loans are very expensive. If you borrow money for essential or recurring expenses, you will fall into a debt spiral and be up to your neck in debt.

Urgent loans have been designed to fund only one-off costs. Lenders strongly discourage the behaviour of funding impulsive purchases that are inessential. It cannot be easy to get out of debt once you fall into the trap of rollover. Further, your credit points will wreak havoc, making it even harder for you to borrow money at an affordable interest rate.

A bad credit rating is not a good sign and speaks to poor money management behaviour. Bad credit loans in Ireland can be availed of when you are in need of money, but they charge very high interest rates. Never borrow money if you do not need it for urgent expenses that you cannot put off.

• You cannot get a promising deal

It is vital to compare your loan deals so you get the best interest rates. Research is paramount even if your credit history is not up to snuff. Bear in mind that interest rates and fees vary from lender accord to lender’s policy. It is hard for a lender to quote the exact interest rate without looking over your credit history and financial condition, but they can provide you with estimation.

You can get details about interest rates from their websites as well. Contact their customer care team if you cannot find that on their websites. There is no guarantee that you will get a loan at an affordable interest rate even if your credit history is stellar.

Before transferring money to your account, your lender will send you an agreement comprising all details about interest rates, fees and how much you will have to pay. This is the most crucial time to check if your budget permits you to pay back that much money in one go. If not, you are not under an obligation to sign the contract. You are absolutely free to back out.

If you change your mind after receiving funds, you can still decide to pay back the whole sum to your lender at once. However, you will have to pay early settlement charges state in your contract.

The bottom line

Urgent loans are emergency loans. You should take them out only when you need money urgently. If the nature of the expense is recurring, discretionary, or you can put it off, you are never advised to use these loans.

Before you take them out, you should check your repaying capacity. These debts are paid back in full on the due date. If you fail to clear your debt on time, the total cost will continue to rise and take a toll on your credit points into the bargain.

If your monthly budget cannot cover this additional cost, you should drop the idea of using these loans. Instead, you should turn to your friends and family. They can help you in your hour of need. However, make sure that you do not deceive them to avoid a strain in your relationship.