A personal loan can help you get back on track if you run into an unexpected expense. Unfortunately, the problem with personal loans is that they can take a few days before you get approval. Lenders use a process called underwriting to look at your financial situation, income, credit score and other factors when they decide whether you qualify for a loan. This process can take a few business days or even a week, which might not work for you if you need cash fast.
Thankfully, there are many same-day loan options that you can use to get cash without waiting for an underwriter to finish looking at your information. However, many of these loans include hidden caveats that can make your loan more expensive. You may not even realize the full cost of your loan until you’re stuck with the bill.
Overview: What is a Same Day Loan?
As the name suggests, a same day loan is a loan that allows you to get funds on the same day as you apply for the loan. Same day loans usually have no underwriting and very few barricades, which can make them appealing for people who are in a sudden financial rut. Like a personal loan, you can use the funds you receive from a same day loan for almost anything you need. From an unexpected auto repair bill to a boost of cash before a vacation, there are almost no limitations on how you can use a same day loan. Same day loans don’t have a long waiting and underwriting period, unlike a private loan. You usually get your money within one business day.
Many of these loans have very high interest rates or fees. You should fully read the terms, conditions, fees and interest rate of any loan you’re considering before you agree to it.
How do Same Day Loans Work?
There are two major types of same day loans: payday loans and pawn shop loans. The specific process you’ll go through to get your money will vary depending on the type of loan you choose.
Payday loans are very short-term loans that you can get on the same day as when you apply. Though there is no standard definition of a payday loan, the Consumer Financial Protection Bureau (CFPB) says that most payday loans have high fees, high interest rates and short terms. The name “payday loan” comes from the idea that you should only have the loan out for about two weeks, or until your next paycheck arrives.
Here’s how payday loans work. First, you’ll visit a payday loan center that offers short-term loans. You usually cannot get a payday loan from a bank or credit union. After letting the lender know how much money you need, the lender will draw up a contract that tells you your loan’s terms. Most payday loans have terms of about two weeks, high interest rates and an additional service fee you must pay when the loan is due. Once you agree to the terms of the loan, you’ll give the lender a check for the total amount of money you owe at the end of the loan’s term. The lender then gives you cash. The lender will cash your check if you don’t repay the loan. If you do pay back your loan, the lender will return the check to you.
Payday loans have a negative reputation because they’re expensive. When you take out a payday loan, you can expect to pay between 300% and 780% APR on your loan. This is often in addition to a flat-rate service fee. These two factors can make it very difficult to pay back what you owe. The CFPB found that if you take out a payday loan, you have a 20% chance of defaulting on what you owe. Make sure that you’ve exhausted all of your other same day loan options before you think about taking a payday loan.
Pawn Shop Loans
You may be able to get a pawn shop loan on the same day that you apply for it. A pawn shop loan is a type of secured loan that requires you to “pawn” collateral by leaving it with the pawnbroker. Some of the most commonly pawned items include jewelry, loose gemstones, electronics and photography equipment. In exchange, the pawnbroker assesses your item’s value and offers you a loan for 25% to 60% of the item’s resale value. You pay the money back with interest at the end of your term and get your item back.
What happens if you don’t pay back your loan? The pawnbroker keeps your item and resells it to recoup its money.
Unlike a payday loan, you cannot choose how much you borrow with a pawn shop loan. Most pawn shop loans are between $75 to $100. You’ll usually need to pawn multiple items if you need more money than that. Pawn shop loans usually also have longer terms than payday loans do, typically ranging from one to two months. Interest rates at pawn shops vary but are usually much lower than payday loans. The average pawn shop offers an interest rate between 12% and 240% APR or more, depending on where you live.
The obvious downside to a pawn shop loan is that you need to have something valuable that you’re willing to put up as collateral. You’ll lose your property if you can’t repay your loan. You shouldn’t visit a pawn shop loan unless you don’t mind departing with the item you’re pawning. You might find that interest accumulates faster than you can afford to pay it off.
What to Look for in a Same Day Loan Alternative
You don’t have to scramble for a same day loan if you run into financial trouble. There are affordable alternatives to these expensive loans. Here are a few things to look for when you search for a same day loan alternative.
Chances are that you need money quickly if you need a same day loan. Look for a lender that offers a simple, straightforward signup process. The best same day loan alternative providers also allow you to sign up online.
Like quick signups, you’ll want a lender who deposits your money into your account instantly. This gives you easier access to your money and helps interest and fees from quickly accruing.
Fees can make it more difficult to pay back your loan. Look for a lender that offers service without excessive fees or administrative charges.
High interest rates can make it difficult for you to pay back your loan. Payday loans and high interest rates often cause borrowers to roll over what they owe, trapping them in a cycle of interest and fees. Save yourself both stress and money by choosing a lender or bank that offers a low interest rate. Some banks (like MoneyLion) even offer 0% APR cash advances.
The Same Day Loan Alternative: Instacash from MoneyLion
Looking for an easy way to get a loan fast? Instacash from MoneyLion allows you to access your next paycheck a little early, with no interest charges or outrageous fees. You can get up to $250 in Instacash deposited directly into your account when you need it, for whatever you need it for. And you’ll pay 0% APR on any money you access! Best of all, you’ll see your money in your account as soon as you request it — you won’t sit around and wait for approvals and underwriting.
Get a Safe Loan Quickly
Are you ready to get started with Instacash? MoneyLion can help you unlock a healthier financial future. Take the first step today by downloading the MoneyLion app from the Google Play or Apple App store.