- Payday Loans Can Leave You Worse Off Than Before. Do This Instead
- What to Do When You Need a Small Loan
- Payday Loan Alternatives
- Unsecured Personal Loan From a Bank, Online Lender, or Credit Union
- Credit Card
- Gig Work
- Withdraw From Your Retirement Account
- Other Loan Alternatives to Watch Out For
- Payday Advance Apps
- Secured Loan
- The best fast personal loans for quick cash
- Best for excellent credit: LightStream personal loans
- Best for good credit: Upstart personal loans
- Best for fair credit: Avant personal loans
- Payday alternative loans from a credit union
- Loans from friends or family
- A 0% interest credit card
- Why trust our recommendations?
- How did we pick the winners?
- Can I get a personal loan without a credit check?
- What can a personal loan be used for?
- Could I save money by waiting for my cash?
Payday Loans Can Leave You Worse Off Than Before. Do This Instead
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As the pandemic grinds on into its fifth month, eviction moratoriums are expiring, and the additional $600 weekly federal unemployment benefit has ended. This has left many in a tough spot. According to a NextAdvisor survey, more than half of American households who received the extra $600 had no plan for what’s next as high unemployment lingers.
If you’re struggling to get by, it’s important to understand the choices you have. Options payday loans can leave you worse off than before.
Payday loans are essentially an advance on your next paycheck. You borrow an amount typically less than $500, and the loaned amount is paid back from your next paycheck—often with a very high interest rate.
While some states outlaw payday loans outright or limit the interest and fees, most do not. That means it’s not hard to end up with a payday loan with an APR, or annualized rate of interest plus fees, of close to 400%. That’s over 25 times the APR you’d pay on a typical credit card.
To make matters worse, the Consumer Financial Protection Bureau just ended a regulation requiring payday lenders to verify a borrower’s ability to repay before issuing a loan. This makes it easier for someone trying to make ends meet to potentially spiral even further into debt with a payday loan.
Thankfully, there are ways to access small amounts of cash without paying extremely high interest and fees. Here are a handful of options to consider before you turn to a payday lender.
What to Do When You Need a Small Loan
If you’re struggling to pay bills on time, take a step back and assess the situation.
This can be the hardest part, especially now, says Tara Alderete, director of education and community relations at Atlanta-based non-profit financial counseling firm Money Management International.
Alderete recommends starting by separating your spending into wants and needs. If something is a want, then wait and save up to make the purchase.
When it comes to needs, you may be able to find assistance outside of a loan. Many local charities and government organizations offer help if you’re struggling to pay for necessities, food, utilities, or medical bills.
But after applying, it can take up to a month to receive some government benefits. If you need more immediate assistance, you can call 211. An operator can connect you with local charity offices, the United Way or the Salvation Army, which may have quicker turnaround times.
Keep in mind you can exercise your mortgage forbearance options or make payment arrangements with your creditors before borrowing money with interest.
Looking forward, Alderete counsels individuals to lay a foundation to help be better prepared for similar situations in the future.
Taking care of your credit and setting up an emergency fund will give you more options when you need cash quickly.
Instead of a payday loan, consider other options first.
A lesser-known alternative is the payday alternative loan (PAL) – a more affordable option through a credit union with lower interest rates compared to a payday loan.
Payday Loan Alternatives
It may be ideal to set up a budget and emergency fund to eliminate the need for a small loan, but the reality is that emergencies happen. And unfortunately, living through the worst pandemic in a century doesn’t relieve us of the need to keep the car running and the lights on.
Any time you borrow money, pay attention to the fine print, so you know what you’re agreeing to. Consider not only the interest rate but also the fees and what will trigger them.
Understand what, if any, loan origination fees and prepayment penalties are attached to the loan, which can unexpectedly increase your costs.
Be sure you understand the repayment terms, so you know exactly what you’ll owe and when it’s due.
Here are a few options that, while not always ideal, are better financial decisions than taking out a payday loan.
Unsecured Personal Loan From a Bank, Online Lender, or Credit Union
Getting a personal loan from a bank could be a decent option, but rates vary widely depending on your credit score.
It’s complicated right now because credit is very tight, says Greg McBride, chief financial analyst at Bankrate.com. Banks are currently more hesitant to issue personal loans, even small ones, if you have poor credit. And if you have a lower credit score, you’ll get stuck with a higher interest rate.
If you don’t have excellent credit, your options for getting a small amount of cash quickly, and with a decent interest rate, may be more limited.
But having a preexisting banking relationship is helpful, particularly with federal credit unions. If you’ve been a member of a credit union for at least a month, you can apply for a payday alternative loan (PAL), Alderete said.
These loans are typically for $200-$1,000 and have much lower interest rates than traditional payday loans.
However, the interest can generally range between 28%-35%, making some credit card APRs a better alternative.
We don’t recommend putting expenses on a credit card if you can’t pay it off each month, but even a credit card’s interest and fees can be more manageable than what you’ll get hit with on a payday loan.
In early 2020, the average credit card interest rate was 15.09%, while the average APR for those with poor credit was close to 23.5%. Some credit cards have promotional 0% APR periods for which you may qualify.
It’s important you check your card’s APR before choosing this option.
With many credit cards, you also have the option of taking out a cash advance. But a credit card cash advance is even more expensive than carrying a monthly balance.
Cash advance interest rates are almost always higher, and you’ll start paying interest on day one. (With a typical credit card purchase, you won’t pay interest until the billing cycle closes.
) So only take out a cash advance if you can’t pay your emergency bills with a card and you have no other options besides a payday loan.
If you have the time, there are ways to find work you can fit around your schedule. Alderete says apps DoorDash, Instacart, and Amazon Flex offer a chance to make some quick money on your schedule.
Gig work can be an excellent way to build up your savings, but you may have to wait up to a week to get paid.
Also, while bike delivery is available in some cities, most gig work requires a reliable vehicle.
And while many delivery services are seeing increased demand, many unemployed and underemployed people are signing up to work for these companies, making it harder for everyone to make a decent living.
Withdraw From Your Retirement Account
Depending on the retirement account you have or the type of expense you need to pay, you can take a loan out or make an early withdrawal. Usually, early withdrawals from your retirement account result in fees and tax implications. That’s in addition to the potential return on your investment you’d be missing out on.
But, if you only need a small amount of money, it’s not the worst option.
If you’ve experienced financial hardship because of the pandemic, it’s now easier to borrow from a 401(k) account.
Congress passed the CARES Act in March in response to the hardship experienced by financially impacted Americans. It has a provision waiving extra fees and taxes on 401(k) loans.
If you qualify, you’ll still need to pay the money back within three years. Otherwise, it will be counted as taxable income.
Other Loan Alternatives to Watch Out For
Aside from traditional payday loans, there are other loan options you’ll want to avoid in most situations. These options either have similar terms to a payday loan or have their own unique risks.
Payday Advance Apps
Depending on your job, you may be able to get a payday loan for the hours you’ve already worked but haven’t been paid for by using a payday advance app. You’ll need to verify your employment and income, and many payday advance apps need to be set up by your employer.
On the surface, these apps seem less nefarious payday loan alternatives. For example, some don’t send debt collectors after delinquent accounts or allow loan rollovers. Instead, you’ll just get cut off from borrowing if your loan isn’t paid back.
One popular app even offers an optional “tipping” feature in lieu of interest or fees. While no interest is nice, even a $4 “tip” on a $100 two-week payday advance equates to a triple-digit APR.
Also, most of these apps require access to your bank account so they can automatically withdraw the money you borrowed.
This puts you at risk of incurring overdraft fees if the withdrawal exceeds your account balance.
Overall, a payday advance app isn’t a long-term solution because you’re still taking money from your next paycheck.
With less cash on hand in the future, it’s easy to create a cycle of relying on payday advance apps, just with a payday loan. A handful of states are investigating these apps for predatory lending practices.
And some have accused them of essentially being a payday lender, under a different name, in an attempt to skirt lending regulations.
Secured loans often have better interest rates, and can be easier to qualify for, than unsecured loans. This is because the loan is “secured” by an asset you own, and if you can’t pay up, the lender can take your collateral.
So while a secured loan is safer for the lender, it’s riskier for you.
Secured loan options include home equity lines of credit (HELOC), auto-title loans, and pawnshop loans. If you’re struggling with your bills, putting your house or car on the line could make a bad situation worse.
With a pawnshop loan, you may not be putting something critical to your survival on the line, but you’re usually getting a bad deal.
You’re going to get pennies on the dollar of what the asset is worth, McBride said about pawning your valuables. So you might not be able to borrow as much as you think.
And if you don’t pay back the loan, plus fees, within the agreed-upon time period, you lose the item.
The best fast personal loans for quick cash
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Not every personal loan has funding available the same or next business day for quick cash, but some lenders offer this option.
However, personal loans are expensive, and fast personal loans are even more so. That quick turnaround could come at the cost of higher interest rates. You could get a lower interest rate from another lender that doesn't offer same-or next-day funding by waiting a few extra days, if possible.
The best quick personal loan for you will largely depend on your credit score. a grade for your borrowing, credit scores falls on a scale between 300 and 850. Here's how the scores break down, according to FICO:
- Very poor: 300 to 579
- Fair: 580 to 669
- Good: 670 to 739
- Very good: 740 to 799
- Exceptional: 800 to 850
Knowing your score before you start shopping for a personal loan could help you find your best deal quicker. Check your credit score for free online to see what interest rates and loans you could qualify for.
Best for excellent credit: LightStream personal loans
- Same-day funding, if accepted, verified, and signed before 2:30 p.m. ET
- Interest rates range from 2.49% to 19.99% APR with AutoPay (Rates as of 03/01/2021. Rates vary by loan purpose.
- Only available for borrowers with good or better credit
- Loan amounts from $5,000 to $100,000
- Terms range from two to 12 years* (depending on loan purpose)
LightStream personal loans are a solid choice for both relatively low interest rates and same-day funding.
This lender also topped Insider's list of best personal loans in 2021, and quick funding is yet another bonus.
However, this lender won't be a good option for anyone with a poor credit score or little credit history. LightStream requires that applicants have a minimum credit score of 660.
For anyone who does qualify for a personal loan with LightStream, this is the most affordable option for fast cash. If your loan is verified and signed before 2:30 p.m. ET, same-day funding is available.
Learn more about Lightstream personal loans »
Best for good credit: Upstart personal loans
- Next-business-day funding
- Interest rates range from 8.27% – 35.99% APR
- 3-year and 5-year terms
- Loan amounts from $1,000 to $50,000
Lending platform Upstart offers quick personal loan funding, but borrowers who could qualify through LightStream could get lower rates and faster service and more flexibility with LightStream.
Upstart offers only three and five-year loans. However, the average interest rate of all 3-year loans issued through the platform was 25.79% in September 2020. While the platform has no prepayment penalties, there's less flexibility in terms than for loans offered by other lenders.
Next-business-day funding is available as long as the personal loan is accepted by 5 p.m. ET.
Learn more about Upstart personal loans »
Best for fair credit: Avant personal loans
- Next-day funding available
- Interest rates range 9.95% to 35.99%
- Loan amounts from $2,000 to $35,000
- Loan terms from two to five years
Avant personal loans are the best fast-funding personal loan option for anyone with fair credit.
This lender also made Insider's list of best personal loans of 2021. Avant doesn't have the lowest available starting APRs available, but the typical Avant borrower has a credit score between 600 and 700.
This company will consider scores lower than what others will, and can provide funding the next business day if the loan is approved by 4:30 p.m. CT on a weekday.
However, it's worth noting that this lender charges an administrative fee up to 4.75%. While it could be an option for anyone needing quick funding with fair credit, borrowers with better credit could find better rates elsewhere.
Learn more about Avant personal loans »
Not all banks that offer personal loans will fund them quickly. Insider found seven personal loans from reputable lenders that fund loans the same or next business day.
- Alliant Credit Union personal loans: Alliant has minimum credit score requirements in the mid-600s, the same as Lightstream. However, Alliant's interest rates are higher than Lightstream's.
- OneMain Financial personal loans: While this lender is open to those with fair credit, interest rates are relatively high. Lower interest rates and the same next-day funding is available through Avant or Upstart.
- Best Egg personal loans: Best Egg does sometimes offer same-or next-business-day personal loans, but there's no guarantee. On the company's site, it claims that most borrowers should expect to see funds within three days.
- HSBC personal loans: This lender requires an excellent credit score for approval, but interest rates start higher than with LightStream. Borrowers who aren't current customers will pay higher interest rates than those who are. Only existing customers can receive same-day loans; non-customers will receive money the next business day.
- Lendingpoint: High interest rates and an origination fee up to 6% could mean there are better rates to be found elsewhere.
- BBVA personal loans: Though the bank doesn't give an official minimum credit score, only borrowers who have received an invitation for a personal loan can apply online. Only current customers can receive same-day funding and autopay discounts.
- Wells Fargo: While this bank offers same-day funding and a secured loan option for lower interest rates, Wells Fargo's personal loans are difficult to apply for if you're not a customer.
It's worth noting that if you have an emergency fund or cash savings, dipping into those resources is a better option than borrowing. If you need to borrow money in an emergency, there are a few other avenues to explore.
Payday alternative loans from a credit union
- Best for: credit union members needing small loans (under $1,000)
Not to be confused with traditional payday loans, payday alternative loans are offered by many different credit unions and work with all types of borrowers. Only available to members, these loans are good for anyone needing a small loan, and who can repay it quickly.
According to the National Credit Union Administration, payday alternative loans typically range from $200 to $1,000 and have terms between one and six months. Check with your credit union to see if this option is available, and what interest rates and borrowing amounts are available.
Loans from friends or family
- Best for: small amounts, quick cash
While loans from family or friends aren't to be taken or made lightly, it could be an option for anyone needing cash quicker than a bank could send it.
If you plan to make or ask for this type of loan, one financial planner recommends putting loan terms and repayment plans in writing, and paying interest if possible.
A 0% interest credit card
- Best for: small amounts, short loan terms
If you happen to have (or can open) a 0% interest credit card that's still within the intro APR term, it could be a useful option for spending. However, you'll need to repay the balance before the 0% term expires. Most cards have between nine and 21 months interest-free borrowing.
Why trust our recommendations?
At Personal Finance Insider, we strive to help smart people make the best decisions with their money. We spent hours comparing and contrasting the features and fine print of dozens of personal loans so you don't have to.
We understand that “best” is often subjective, however, so in addition to highlighting the pros of a lender's personal loan, we outline the cons, too.
How did we pick the winners?
All personal loans considered for this roundup had funding available either same-day or next business day.
To find the best personal loans for quick cash, we considered the interest rate, range of loan terms available, and amount available to borrow.
To make more effective recommendations, winners were broken down into three different credit score categories. Winners offered the lowest APRs of the competition, and the quickest funding.
Can I get a personal loan without a credit check?
With most lenders, no. All lenders Insider considered in this list required credit checks. OneMain Financial, which we considered, doesn't have a minimum credit score requirement. A credit check could help you get the best interest rate that you qualify for.
What can a personal loan be used for?
Personal loans can be used for a variety of reasons, and lenders generally specify what loans can be used for. Generally, they're best used for emergencies, a home repair or medical expenses.
Personal loans can also be used to cover large purchase expenses that don't qualify for other loans, a motorcycle or RV purchase, or for a wedding. Credit card debt consolidation is another common use, making credit card debt easier to manage by putting it all into one monthly payment. Check with your lender to make sure your plans fit the lender's personal loan options.
Could I save money by waiting for my cash?
In some cases, yes. Some lenders will charge higher interest rates or fees for the convenience of quick cash. Working with a lender that has a lower interest rate and waiting a few days for your money could help you save on interest over time.
Related The best personal loans of 2021
However, that's not always the case. Anyone with excellent credit scores looking for a personal loan should certainly consider LightStream, as low interest rates make it a top contender for personal loans even for people who don't need the cash immediately. The same goes for borrowers with fair credit scores and Avant, which also topped our list of best personal loans in 2021.