When you need cash in a flash, plenty of easy-to-get loans exist in the marketplace. With potentially no credit check and fast funding, these loans can be tempting for emergencies — especially if you have minimal or bad credit. But they’re also expensive and come with risks.
It’s a good idea to explore alternatives before taking out any of these loans. If you decide one makes sense, be sure to understand how the loan works and its costs before you sign on the dotted line.
[Read: Best Bad Credit Loans.]
Easy Loans: A Double-Edged Sword
When facing a financial crunch, the simple application process for an easy-to-get loan can feel like a godsend. Many of these loans don’t require a credit check and can put cash in your hand the same day. But that convenience comes with a cost.
“Generally speaking, you need to be aware of high annual percentage rates,” says Ryne Vickery, a certified financial planner at Buckingham Strategic Wealth in St. Louis.
For example, payday loans and title loans typically charge APRs of roughly 400% and 300%, respectively. Vickery says it’s easy for borrowers to accumulate more debt if they don’t pay off these high-cost loans promptly.
Beyond high interest rates, sky-high fees can add to your debt. For example, personal loan origination fees can be as high as 10% of your total loan, and title loans may charge documentation, processing and other fees.
Finally, these loans can put your credit or collateral at risk, especially if you have other debt, as an additional loan payment could make staying current on all your debt obligations more challenging. If you have late payments on a personal loan, your credit score could suffer, and missing payments on a title loan or pawnshop loan could cause you to lose your property.
Easy-to-get loans are likely popular despite their risks because lenders have made them so accessible, says Joseph Carpenito, a financial advisor with Materetsky Financial Group in Boynton Beach, Florida.
“Consumers can go from receiving a marketing email promoting some form of preapproval to clicking a button and applying for the loan within minutes without ever speaking to an actual person,” he says. This easy, breezy application process may mean that borrowers choose not to consult a professional, much less understand the risks these loan types present.
Ultimately, easy loans that grant short-term relief can cause long-term grief if you don’t proceed with eyes wide open and a plan to repay them.
[Read: Best Personal Loans.]
What Are the Easiest Loans to Get and Their Risks?
If you feel you have limited borrowing options, the easiest loans to get may include personal loans designed for those with poor credit along with payday, title and pawnshop loans.
Bad Credit Personal Loans
How they work: If your credit has a few dings and scratches, you may be able to use a personal loan for bad credit to get the cash you need. These loans can be secured or unsecured, and those with bad credit might find better rates with a secured loan, where you put up a valuable asset as collateral. Using a co-signer could boost your approval odds if you have a lower credit score or high debt-to-income ratio.
Depending on the lender, you may have to provide proof of employment and income. If approved, funds are deposited directly into your bank account, and you’ll repay the loan with a fixed payment each month until the balance is paid in full.
When one might make sense: If you want to decrease your borrowing costs, a bad credit personal loan could make sense. While APRs are still high compared to rates for borrowers with good credit, they’re still significantly below the 300% to 400% range of title and payday loans.
Key Features:
— Loan amount: Varies by lender.
— Typical APR: Up to 36%.
— Repayment term: Varies, but often up to five years.
— Time to deliver funds: Varies by lender, but can be same day.
— Credit check required: Yes.
Risks:
— May not qualify for enough funding. Your credit score could mean you’re approved for less than you need.
— Could add to financial stress. Although personal loans for bad credit have lower APRs than other types of easy-to-get loans, they can still be expensive for borrowers with bad credit. Plus, you’ll likely pay more over the life of your loan than a borrower with better credit.
Payday Loans
How they work:
A payday loan is a short-term, unsecured loan you usually agree to repay on your next payday. These loans are available from both local and online lenders.
To qualify, you typically need proof of income, identification and a bank account in good standing. For loan repayment, lenders will often request permission to debit your bank account or require a post-dated check for your loan amount plus fees.
When one might make sense: If you have poor credit and need cash for an emergency, a payday loan could be one of the fastest and easiest loans to get. While interest rates are high, same-day cash could justify the charges for borrowers with limited options.
Key Features:
— Loan amount: Generally $500 or less.
— Repayment term: Two to four weeks.
— Typical APR: About 400%, but can be higher.
— Time to deliver funds: Same day.
— Credit check required: No.
Risks:
— Potential to accumulate more debt. You may be able to extend your loan term in exchange for a fee, but this can make your debt snowball to an unmanageable amount. Know that you can limit costs by enrolling in a no-cost extended payment plan, if one is available.
— Potential credit impact if you can’t pay. Payday lenders generally do not report your debt to the credit bureaus. If you don’t pay back your loan, though, the lender could sell it to a debt collection agency. Having an account in collections can hurt your credit score.
Title Loans
How they work: A title loan lets you put up your vehicle’s title as collateral for a loan. Generally, you’ll need to own your car outright, but some lenders will lend against a car you’ve mostly paid off, according to the Federal Trade Commission.
You’ll bring your car to the title lender for an inspection to qualify for a title loan. Then, you’ll need to show proof of insurance, photo identification and the title. When approved, you’ll receive the cash the same day and surrender your title, which you won’t get back until you repay the loan in full.
When one might make sense: If you don’t qualify for a bad credit personal loan and need a sum larger than a payday loan, a title loan could help you get cash fast. While APRs are high, they could be a reasonable option if you know you’ll have the funds to repay the loan in full by its due date.
Key Features:
— Loan amount: Generally 25% to 50% of your vehicle’s value.
— Repayment term: Typically 15 or 30 days.
— Typical APR: About 300%.
— Time to deliver funds: Same day.
— Credit check required: No.
Risks:
— Increasing debt. If you can’t completely repay your loan before the due date, the lender may let you roll the balance into a new loan with additional fees.
— Loss of vehicle. If you don’t repay your loan, the lender can take your car — even if its value is more than you owe.
Pawnshop Loans
How they work:
If you have a valuable item that a pawnbroker thinks they might be able to resell, you can often use that item as collateral for a pawn loan. After valuing your item, a pawnbroker will make you an offer — typically between 25% and 60% of the item’s resale value.
Pawn loans have few requirements other than the borrower being 18 or older and having valid photo identification. Once you receive your cash, you must repay the loan by the due date or risk losing your item. Some pawnbrokers will let you roll over a remaining balance, but fees can apply.
When one might make sense: If you only need a small amount of cash for a short time, a pawn loan might make better sense than a larger personal loan or even a payday loan. Though costs can be high, APRs come in lower than the typical payday or title loan.
Key Features:
— Loan amount: Typically 25% to 60% of the collateral’s resale value.
— Loan terms: Generally 30 to 60 days.
— Typical APR: 12% to 240% or possibly more in interest, plus potential fees for storage and insurance.
— Time to deliver funds: Same day.
— Credit check required: No.
Risks:
— Lowball offers. A pawnbroker might lend a different amount than you expect, despite what you might have paid for an item.
— Loss of item. If you don’t repay a pawn loan, the pawnbroker can keep and sell your item.
[Read: Best Debt Consolidation Loans.]
Alternatives to Easy Loans
Before you take out one of the easy-to-get loans above, it’s worth exploring other options. Doing so could give you quick access to cash and help you save money over more costly loan types.
Loans from a Credit Union
If you are a member of a credit union, you could find a personal loan with a more favorable rate than one of the previously mentioned loan options. You may be able to qualify for a credit union personal loan even if you have fair or bad credit.
Payday Advance Apps
A payday advance app could be worth exploring if you need cash in a pinch and receive your paycheck through direct deposit. With fees a far cry below the exorbitant rates of many easy-to-get loans, apps could help you save when you borrow.
These apps typically connect to the bank account where you receive direct deposit. So when you need cash before your payday, you can use one to get a cash advance for part or all of your paycheck without a credit check. Fees vary by app and your average direct deposit.
But don’t let the easy cash from payday advance apps become a trap. Instead, make every effort to repay advances in full on your next payday to keep debt from accumulating.
Payment Plans and Assistance Programs
If you’re struggling to pay medical or utility bills, you may be able to request a payment plan. These programs can help you avoid ongoing late fees. Check the company or utility provider’s website for payment assistance options or call customer service to ask about options.
Some government programs and nonprofit organizations may also offer assistance with utility bills if you’ve hit a financial hiccup. While some programs have income restrictions, they can potentially introduce you to help you didn’t know was available.
401(k) Loans
If paying yourself interest sounds better than paying interest to a high-cost lender for an easy loan, you could consider a loan from your 401(k). If your plan allows loans — and not all do — you can borrow from your vested balance and repay the loan with interest to your 401(k) in monthly installments.
While 401(k) loans can be an easy option with no required credit check, they aren’t without drawbacks. For instance, loans from 401(k)s generally need to be repaid in full within five years. Otherwise, the IRS will consider your outstanding balance an early withdrawal subject to income tax and a 10% penalty.
Local Food Assistance
If you’re struggling to afford food, local food assistance options may be available as an alternative to high-cost loans.
You can locate food banks in your area using Feeding America’s food bank locator. Then, you can call food banks for information about free food distribution dates. You can also contact local churches in your area to see if they offer community food bank programs.
Depending on your income, you may qualify for food assistance programs like the Supplemental Nutrition Assistance Program, known as SNAP, or the Special Supplemental Nutrition Program for Women, Infants and Children, known as WIC. Your local food bank may be able to help you determine if you qualify.
Prepare for Next Time
Finally, you can prevent the need for easy, high-cost loans by building up an emergency fund. You can open a savings account and squirrel a bit away each payday. Over time, you’ll have a decent cash cushion to cover life’s curveballs, which can prevent taking on more debt.
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