Why You Should Be Careful with Instant Approval Personal Loans

Getting a personal loan instant approval has become a very common thing in today's society. People want instant gratification and instant approval loans provide that for them. While it will help you get your hands on money immediately, you should be a little skeptical of using these types of loans. Here are a few things to consider about instant approval personal loans.

Credit Approval Process

Traditional loans are designed to approve those that have a high likelihood of being able to repay the loan. With a regular loan, the lender looks at your credit history, the amount of debt that you have, and your income. They use several financial ratios to determine whether or not you would represent a good credit risk. A lot of thought and historical data goes into this loan underwriting process. Although it prevents some from getting approved for a loan, ultimately it is in their best interests. If they are not approved for the loan, there is a high probability that they would not have been able to repay the loan if they received it. That would have further damaged their credit and put them in a deeper hole financially. 

The instant approval personal loan process completely circumvents this entire process. While they may quickly look at your credit score, there is no way that they can accurately way all of the factors involved in a typical loan approval process. This lead them to make snap judgments on borrowers. It also leads to a high level of defaulted loans and even more damaged credit. 

High Interest Rates

Another reason that you should most likely stay away from instant approval personal loans is the interest rate that you will be charged. Interest rates on instant approval loans are typically very high compared to other types of loans. This will make your monthly payment higher and it will increase the total amount of the loan overall. It will result in you spending quite a bit more money than you need to. The instant gratification that you get from avoiding a normal loan approval process is usually not worth the amount of money that you have to pay for it. 

High Fees

When dealing with instant approval personal loans, you should also be hesitant to get involved because of the fees. Most instant approval lenders charge very high fees for their services. You might have to pay an origination fee, a processing fee, and any number of other fees. If you are late on a payment or need an extension, the fees are usually outrageous.

Sometimes, the fees that are incurred with these types of loans results in spending as much money as you did for the entire amount of the loan originally. These fees tilt the scales greatly in favor of the lenders and make an instant approval personal loan a losing proposition in most cases. Due to this factor alone, you should be very skeptical of getting involved with this type of lender. 

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