The need to borrow money might arise for several reasons. You are planning a big purchase, like a house, and you need to finance this with a loan. You have incurred an unexpected emergency expense and need to borrow money for it. There are many such situations requiring short or long-term loans. You can borrow the money from friends or family members, or through formal channels such as a bank.

When you borrow money through any channel, be prepared with a repayment plan. Do this even if you have just borrowed the money from your family. Set aside the amount to be repaid each month and stick to the schedule, to avoid getting into a debt situation that you can’t manage.

Types of loans you can get

You can get different types of loans, such as personal loans, mortgage loans, auto loans, home equity loans, credit card loans, and so on. Loans generally fall into two broad categories: secured loans and unsecured loans.

Mortgage loans and car loans are secured loans. Mortgages are loans you get to purchase a house, the house itself serving as security for the loan. If you fail to clear the debt, the lender can seize your house and sell it to collect the loan. A car loan is similar, where the car is the security instead of a house.

Personal loans and cash loans are generally unsecured loans. You don’t give any collateral for these loans. So, the loan amount you can borrow is lower, and the repayment duration shorter. The interest rate is also much higher than the interest on secured loans.

Personal loans are usually taken for larger amounts and have a longer repayment schedule. Cash loans are mostly small amounts borrowed for a very short duration, and the interest rate could be high.

Why choose cash loans?

Cash loans are short-term solutions. You may be in a bad financial situation and you may need the money to meet your regular or extra expenses until your next paycheck arrives. These loans are usually small amounts that you are expected to repay within 4-6 weeks. These loans may not involve credit checks and so are ideal for people who have a bad credit score. They are easy to get and are quickly paid into your bank account, enabling you to access the money at once.

Types of cash loan

There are different types of cash loans, you can even get short-term personal loans to tide over your expenses for a few months. However, while short-term personal loans allow you to pay back the amount in installments, other cash loans usually have to be paid in a lump sum on the due date.

Payday loans

These are short-term loans, small amounts carrying high-interest rates. They have to be paid off within a few weeks, usually by the time your next paycheck arrives. These are usually used by people who have a bad credit score and are having difficulties in meeting regular expenses with their monthly income. Sometimes, these are termed as cash advance loans but are structured like payday loans. In some states, Payday Loans are not allowed.

Cash advances

Cash advances are borrowed on your credit card. You can withdraw cash from your credit card at an ATM within the allowed cash limit on your card. If you fail to pay back the loan within a month, you will be charged a high-interest rate and you could also incur penalties for missed payments.

Short-term personal loans

If you have an average to good credit score, you may be able to get a short-term personal loan for small amounts ranging from $500 to $2,000 or even up to $5,000. You will get a longer period to repay the loan with a fixed schedule and interest rate. You may be allowed to repay the amount of monthly payments over several months. This could be a better choice rather than borrow small amounts at very high rates every few weeks.

Small personal loans allow you to plan and repay the loan and meanwhile, you have a larger sum to meet expenses for several months. You get time to look for a better paying job and to save money to repay the loan.

When you are in dire need of cash to pay for essential needs, you may be forced into borrowing money from any source, increasing your chances of getting into a debt mire. Look at your options carefully, and borrow from trusted sources. Cut back as much as possible on your regular expenses to save the money for repayment. If your financial situation improves, repay high-interest debts quickly and plan your finances well to avoid getting into the need to go for cash loans again.