16Nov2016

Emergency Loans: When Should You Take One Out?

Strapped for cash when you need it now? You may be wondering if it’s time to take out an emergency loan. Here’s what you need to know to make a great choice.

Everyone’s been there.

You’re getting along fine and then something happens. Maybe it’s a medical bill you didn’t expect or an emergency dental procedure you didn’t see coming.

Maybe it’s a school trip for your kid they didn’t tell you about.

Sometimes, your next payday is just too far away and you haven’t been able to save for it.

That’s where we come in.

At Cigno, we offer emergency loans for people with bad credit, no credit, or who traditional lenders might have overlooked.

Not sure if an emergency loan is for you?

Here’s a quick guide to different types of emergency loan options and when you should take one out.

1. Credit cards

Credit cards are the option of choice for traditional lenders looking to provide quick access to credit.

If you have one already, it’s a simple matter of accessing an ATM and getting your cash.

Even if you don’t have one, applying and getting one is still an extremely fast option to pay your bill.

May cards even come pre-approved, allowing even quicker access to credit.

There are a couple of benefits to this sort of emergency loan access:

You keep all your financials with one lender,allowing for easier management in the long term
If you already have a credit card, it’s usually the quickest access to credit available to you
If you pay your credit card bill on time, it helps build your credit score and is extremely cost effective

However, there are some downsides to this type of credit.

First, if you need cash right now then a credit card application might not be fast enough.

Second, credit cards have notoriously high interest rates – most hover around 14% and charge compound interest each month. This means that even a small bill unpaid can quickly add up.

For example, if you borrowed $100 at 14% and didn’t pay it for three months, your bill would be $148.15.

A significant increase in cost.

When to use credit cards for an emergency loan

If you already have a credit card and have a plan to pay it back relatively quickly, it’s likely the best option for you.

If your bill can wait a few weeks while you get a credit card, then it’s even better – many options come with one-off interest-free periods, meaning that if you can pay it back within the interest-free timeframe, you can essentially borrow for free.

2. Payday Loans

Payday loans are loans that are given out on the assumption they’ll be paid back with the next pay cheque.

Perfect for those times when your next payday is just that little bit too far, payday loans are the fastest and easiest ways to access credit.

Payday loans have a few advantages over other emergency loan options:

Since they are guaranteed by your next pay cheque, they are usually available to those with bad credit
Because they are expected to be paid back within the week, fortnight, or month, they are extremely quick to access (often within the same day!)
You can get them for very small amounts – usually less than $1,000

These benefits mean that if you’re in a corner and don’t know how to get out, they can be a fantastic lifeline.

Since they’re given based on your income and only for the precise amount you need, it’s more difficult to over-borrow and get into trouble.

Finally, while their costs are higher because the lender is assuming more risk (after all, if you don’t use your pay cheque to pay back the loan,the lender is left holding the bag) there are actually government restrictions on what lenders can charge.

For example, at Cigno our lender’s fee only charges 5% interest on the loan amount.

When to use payday loans for an emergency loan

Payday loans are particularly effective for those with poor credit who can’t access other forms of lending like credit cards or home equity loans.

Specially designed for the small amounts of money that can ease the stress of an emergency situation, they are perfect for quick injections of cash, exactly when you need them.

However, they do carry a higher cost in general than other lending options out there – a premium paid because of their higher lending risk and the ease of lending.

In short, you pay a price for convenience.

3. Home equity loans

Like credit cards, home equity loans usually come from traditional lenders. Since they require a house, you’ll likely get it from the same provider as your mortgage.

Home equity loans are loans that are secured against your house. Basically, it’s a promise that if you don’t pay back the money that the lender gives you, they can come in and take your house to ‘make good’ on your loan.

Because there’s less risk to the lender of not getting their loan back, lenders will lend with a lower interest rate and usually lend more, so you can borrow a bigger amount for less.

However, there are a few catches to consider before you get a home equity loan.

For starters, they take longer to process. Since you’re dealing with a traditional lender, they move at traditional lender speed – slowwww.

Second, you need a house to be eligible. Not only that, you need a house that has significant equity in it to be worth something to the bank if you don’t pay back your loan. This means that the amount you’ve paid off from the mortgage from the principal amount you borrowed in the first place is higher than what you’re asking to borrow.

For example, if you borrow $100,000 for a house and pay back $20,000 of that plus interest, then you can probably get a home equity loan for up to $20,000.

Finally, you need to comfortable with the fact that if you don’t pay back your loan, you will likely lose your house, so the risk is significant for you the borrower.

When to use a home equity loan for an emergency loan

For a ‘need cash now’ type emergency, a home equity loan might not be a viable option because of the slow processing time.

However, for those with the option and the time, they usually offer the best rates for a quick injection of cash.

One popular financial strategy is to take out a short-term, fast loan for the now and a home equity loan for the future. This allows you to cash to use for your emergency, and the pay that loan back with your home equity loan and enjoy a better rate while you find your feet financially in the weeks and months following an emergency.

Wrap up

It’s extremely common to need an infusion of cash due to an emergency. Whether it’s a medical emergency, an unexpected bill, or just a bill that’s a little higher than you thought, it can happen to anyone.

Fortunately, being a little short one week isn’t the end of the world. Credit cards, payday loans, or home equity are all good ways to get the emergency cash you need when you need it.

Are you looking for a quick cash injection? Apply now for up to $500!

3Nov2016

Pay Day Loans: The Truth About Loans and Your Credit Score

Let’s dispel a myth right now – payday loans don’t hurt your credit score. In fact, they can actually help you build credit. Read more about it here.

As one of the most controversial financial products available, a lot of questions swirl around the idea of payday loans.

While payday loans can be incredibly helpful for those in a financial bind, the thought of these kinds of loans can be intimidating for some if you don’t know all the facts.

Let’s start by getting one thing straight—requesting a payday loan does not hurt your credit score.

What is a Payday Loan?

Also called a payday advance, salary loan, payroll loan, small dollar loan, or cash advance loan, a payday loan is a small, short-term unsecured loan regardless of whether repayment of loans is linked to a borrower’s payday or not.

This type of loan relies on the consumer having previous payroll and employment records.

Payday loans are often used by people who are in a bind with their finances and looking for some assistance in making it until their next paycheck.

In the majority of cases, this option is exercised if no other immediate resources are available, such as credit cards or savings account funds.

How do Payday Loans Affect My Credit Score?

Put simply, because lenders do not typically run a credit check during the application process. That’s why requesting a payday loan does not impact on your credit score.

In place of running a credit check, lenders inquire about your current employment status and source of income.

They can also mandate that you submit a post-dated check to cover the amount of the loan. This happens once funds from your employer are transferred to your account on payday.

However, there is an instance where your credit score could take a hit.

This would occur in the event that a post-dated check you sent to the payday lender does not clear the bank and you default on the loan. In this case, your credit score could be affected (unless you have another source of funds available to cover the due balance).

How will Payday Loans Appear on My Credit File?

There’s no question that payday loans will appear on your credit file, just as any other type of borrowing would.

These kinds of loans are found under the consumer credit section; so even if a payday loan didn’t affect your credit rating, lenders will still be able to see that you have had a payday loan(s).

It’s important to be aware that there are some lenders that will not lend to you if you have any active payday loan accounts.

In some instances, a lender may even have a policy not to lend to you if you have had any payday loan(s) recently.

Payday Loan Positives—How Payday Loans Can be Beneficial

If you meet your repayment obligations to the lender for your payday loan, you will have a clean repayment history. This can be beneficial for your credit file in the way that it shows you to be a reliable borrower, at least for this kind of financial product.

So, just as overdue credit may be negative for your credit score, a payday loan may actually help your credit score.

Since credit reporting in Australia got a makeover a couple years back, credit providers now get a more comprehensive idea of a person’s credit history.

With the introduction of credit reforms that came into effect in March 2014, more information is listet on your file about your borrowing history.

Since this includes having more details about the type of credit account you opened, when the account was opened and closed, and your payment history, your payday loans repayments can prove to be a positive thing.

If you have some adverse credit history documented, this is great news for you! Making your payday loan repayments on time can actually negate any unfavorable credit history on your file.

However, while some lenders take the information on a credit report at any one point in time into account, the weight placed on the info will differ.

Need even more reason to believe in the positivity of payday loans? Another advantage of positive repayment history for payday loans is that the credit limit of open credit accounts is displayed.

This means if you have one of these loans that you’re currently in the process of paying back and a possible lender takes a look at your file, they’ll be able to see that your loan isn’t hefty.

(In the past, prospective lenders would have only seen that you made an application for a loan, but not be aware of whether you opened it or how much credit you were afforded. Now you’re in luck, as borrowers can have a clearer image of your financial position.)

So We’ve Heard the Good News, but Can Payday Loans Negatively Impact My Credit Score?

Unfortunately, depending on the payday loan, it can hinder your credit score as well. However, since your credit score is calculated individually by each credit reporting agency, the impact differs depending on what agency’s calculations you look at.

Credit scores do have a direct effect on a prospective lender’s decision. Therefore, the impact payday loans have on your score can’t be ignored.

The good news is, your credit score is just one of the factors that influence a lender’s decision.

“It is not only the type of lender but the type of credit account, the amount applied for, number and frequency of credit enquiries, as well as a range other factors. A payday loan would, for example, be given a different weighting than a bank mortgage and may contribute to a lower score” said Marketing Manager, Belinda Diprose.

Fortunately, there are ways to keep an eye on your credit file and monitor the impact different kinds of loans have had on your credit score.

So You You’ve Decided to Take Out a Payday Loan, What Now?

While payday loans can be extremely helpful in sticky situations, don’t let the ease of the application process for the loan lead you to make mistakes.

Make sure to be careful with your loans and avoid the following common payday loan mistakes:

Taking out too many loans.
Not making your repayments on time.
Making several applications in a short amount of time.
Not checking your credit file.

Have you ever taken out a payday loan? Tell us what the process was like for you in the comments!

18Oct2016

Emergency Cash: No Emergency Fund? Here’s What to Do

Emergencies are unexpected, and sometimes you need emergency cash to take care of them. If you need more than what you have, this guide is for you.

Knowing where to find fast emergency cash can make all the difference when an urgent need comes up.

Maybe a major illness strikes. Or an accident or natural disaster. Whatever it may be, one thing is for sure: a big unexpected expense will arise at one point or another.

When it does, you’ll be far better off if you’re prepared to face it.

Of course, the best way to meet emergencies is with an emergency cash fund. But sometimes this isn’t possible given your life circumstances.

In the absence of an emergency fund, there are lots of ways to obtain emergency cash within a relatively short span of time. Use this list to pay off what you need to and get back on your feet financially!

Emergency Cash Through Loans

Maybe you don’t have all the money you need right now, but you know you’ll have more cash in the near future.

If this is the case, a loan can be the right solution for you.

There are many different types of loans that allow you to freely spend on your particular emergency need without conditions. The trick is finding the loan solution tailored to your situation.

Personal Loans

Most commercial banks and credit unions offer personal loans. These are short-term loans with a fixed interest rate and repayment period.

You need good credit to qualify for a personal loan, so expect a credit check. Taking out a personal loan, and even inquiring at too many lenders, will affect your credit score.

A personal loan will usually come with reasonable interests rates. However, it may not be for you if your credit is an issue.

Payday Loans

Payday loans, or cash advances, are a convenient way to get cash very quickly without going through a credit check.

With payday loans, you must present proof of income. The lender may ask to see bank statements, pay stubs, etc.

Generally, cash advances require you to pay back the loan plus interest by your next payday (hence the name “payday loan”). Often, they’ll set up an automatic withdrawal with your bank account to facilitate the transaction.

Nowadays, you don’t even need to step into the lender’s office. Online payday lenders approve you via email or phone, after which you receive the money in your bank account within 24 hours.

Title Loans

If you own a car with a clean title (no liens), you can take out a title loan for a fairly large sum of cash.

The amount of money you receive is directly tied to the value of your vehicle. Title loan lenders look at the year, make, model and general condition of your car to determine its current market value.

If you accept the offer, you leave your title with the lender during the duration of the loan (usually 30 days). After that, you pay back the loan and get your title back.

The good thing about title loans is that you keep your car throughout the life of the loan. You can continue using it like normal.

And since your car may be worth several thousand dollars, you may be able to acquire a good bit of emergency cash.

Be careful not to borrow too much. The relatively large sums offered with title loans may tempt you to request a lot. Only borrow what you can afford to pay back in order to avoid problems later on.

Credit Card Cash Advances

Not many people know that you can get cash from your credit card.

If you have a positive line of credit, you can contact your credit card company to request a PIN number.

You then use this PIN at any ATM to withdraw your emergency cash.

Credit card cash advances are very easy to get. However, be aware that the interest rates are very high.

Only use credit card cash advances if you know you’ll have the means to pay it back in the immediate future.

Emergency Cash Through Selling

Most of us own things of value. Maybe it’s jewelry, gold, silver, or high-end electronics.

Even if you don’t own extremely expensive items, you probably have smaller-scale valuable that collectively can help you cover your emergency cash needs.

Where do you go to trade in your items for bucks? Try these.

Pawn Shops

Pawn shops are a favorite emergency cash resource for many people.

The great thing about pawn shops is that they give you cash instantly. And for valuables like gold, jewelry, and smartphones, you can usually choose to either sell or pawn.

If you decide to pawn, keep in mind that your items become the pawn shop’s to sell if you don’t pay the loan back on time.

Therefore, it’s best to avoid pawning items whose loss would be painful (family heirlooms, etc.).

You may have to look around at different pawn shops to find one that accepts the type of item you want to sell. Some buy firearms, some don’t. Some only do gold and jewelry. Some don’t accept musical instruments. Some buy DVDs.

It’s always wise to compare offers. There’s nothing wrong with momentarily turning down an offer in order to see what the store next door will give you. If you don’t find a better offer, you can always come back.

Consignment Shops

Pawn shops don’t deal in everything. For items like clothes, accessories, or furniture, try consignment shops (also known as “thrift stores”).

The only drawback of consignment shops is they usually don’t pay you until after they’ve sold your item. So success hinges on finding a thrift shop that is highly visited and successful.

Selling Online

The internet has made selling your miscellaneous possessions a lot easier.

Some of the safest sites for selling your goods are Amazon, eBay, Bonanza, and Half.com.

If you want to sell something locally, Craigslist is your best bet.

Just take precaution. Don’t post too much personal information on Craigslist. Avoid giving people your home address until you get a feel for how safe they are.

Selling Plasma

If you think you’re out of stuff to sell, there’s one thing you still have left: your biological fluids!

Plasma centers buy plasma to sell to people in need.

The experience is mellow. You watch TV the whole time and get a snack afterward.

To donate plasma, you have to be able to pass the requirements for blood donation. You must be a healthy non-drinker and non-smoker.

Keep in mind that you won’t be able to donate plasma immediately the first time you go. That’s because they do a test that takes about a week to process. Once approved, you can donate twice a week.

Conclusion

Whether it’s with a loan or by selling stuff, emergency cash is readily available.

Use this information, choose the methods that work best for you, and come up with an emergency plan so that you’re prepared in the face of crisis.

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