A cash loan must make it possible to manage short-term financial contingencies, but it is not suitable for projects of large amount. Past $ 4,000 to $ 5,000, it is better to avoid cash credit and rather turn to a personal loan, cheaper on average.
Treasury credit: what solutions?
What we consider as a cash loan is a loan which must allow us to manage fluctuating cash inflows, a difficult end of the month or even to deal with an unforeseen event. It must be fast credit because in these situations one needs very short term money. A cash loan must offer flexibility both for the amount borrowed and for the monthly payments to be repaid. In summary, a cash loan must:
- Get money quickly
- Provide flexibility in use
- Represent a fast loan solution and accepted immediately
NB: in the context of this credit comparison, there is indeed talk of a need for cash for individuals. For a professional cash loan, you must manage it directly with your bank because the conditions are extremely specific.
The two best solutions to meet these criteria are revolving credit and bank overdraft. So let’s compare the pros and cons of each of these products.
Revolving credit has long received bad press. In particular with regard to store credit and its famous credit-backed payment cards. But since the Lagarde law, which much more framed the distribution of this credit, this fast credit without proof of use of the money and easy to obtain – at least more than the others – returned to its primary vocation. It is a cash loan par excellence.
This consumer credit works in a simple way:
- Flexibility of use: reserve of money to use when you need it, which costs nothing when you don’t use it.
- No-charge early repayment: this credit is for easy repayment.
- Small credit: generally made for a credit of 500 $ to 4000 $ with monthly payments from 20 $ / month.
The revolving credit rate, revisable APR rate, can be quite expensive. In any case more expensive than the personal loan. It is therefore essential to compare this type of credit to limit costs.
Our comparator for this type of loan takes into account: the adjustable APR rate, the opening promotion when there is one, the repayment speed and the capacity of each organization to accept the file.
Using revolving credit as cash credit is very common. And yet what is less known is that the speed of repayment influences the cost of credit far more than the rate. Take the example of the Franfinance revolving credit. For the same amount of credit 2000 USD, there is the choice between 3 repayment speeds:
- Slow: 29 monthly payments of $ 84 / month + 1 final payment of $ 63.34; revisable taeg rate: 19.93%; cost of credit: $ 499.34
- Average: 23 monthly payments of $ 100 / month + 1 last monthly payment of $ 100.47; revisable taeg rate: 19.93%; cost of credit: $ 400.47
- Fast: 17 monthly payments of $ 130 / month + 1 final payment of $ 84.41; revisable taeg rate: 19.93%; cost of credit: $ 294.41
With this type of cash loan, we realize that for the same rate, we can lower the cost of credit by more than $ 200 just by repaying 12 months faster.
But if we really use revolving credit like a cash credit, for example to wait for the arrival of a salary within 15 days, this same credit of 2000 USD for 15 days will cost only around 15 $ in all.
According to our estimates and the offer of financial organizations, it is preferable to take a cash loan through a revolving credit from a need of 1000 USD.
Bank overdraft is undoubtedly the default solution most used as cash credit. In fact, almost everyone has an overdraft authorization attached to their bank account. But what we do not know is that it can be very expensive, especially in “traditional” banks. We find below the comparison of the cost of overdrafts in the largest French banks, comparison based on an article on bank overdraft from our bank comparator:
Simply put, when using its authorized overdraft, the bank will take agios on the debt as long as it is not repaid. But the note will get a lot tougher if you use unauthorized overdraft. Indeed, not only will the rate of the agios be much higher but in addition, there will be intervention commissions to pay and as well as rejection costs. It should be avoided at all costs as cash credit. On the other hand, the maximum bank overdraft rates are set like the usury rates by the Bankate.
How to choose the cheapest overdraft loan?
It is actually usually the amount of overdraft that will define which is the best cash credit. Indeed, if you have an authorized overdraft, it is generally a little cheaper. But as soon as we arrive around a 1000 USD credit need, it seems preferable to favor revolving credit as cash credit. This is often the limit between authorized and unauthorized overdraft.