Living paycheck to paycheck is difficult enough without costly emergencies arising. If you’ve exhausted all other borrowing options, your last resort might be a payday advance loan or payday cash advance.
These short-term borrowing alternatives offer small loan amounts and are repaid by your next payday. Most payday loans are more accessible for people with bad credit, since lenders often forgo credit checks. However, they’re also more difficult to repay and often trap borrowers in a vicious debt cycle. Personal loans are another option, and are often a better alternative to payday loans.
What is a payday advance online?
Payday loans are available both in-person at a business and online. A payday advance online is just like it sounds — a short-term loan you sign up for on the internet. The loan is typically due your next payday and no credit check is required. Sounds great, except payday loans are notoriously expensive. Their annual percentage rates (APRs) are often in the triple digits. For example, in Texas, the average APR charged on payday loans is 527%.
For this reason, it’s best to consider other options, like cash advance apps, before getting a payday advance.
Learn More:
How does a payday advance work?
Getting a payday advance online is a simple process. Payday lenders and cash advance apps use a few key pieces of info to approve you for a payday advance online or a cash advance.
You must typically:
- Verify your income
- Have an active bank account
- Have a valid ID (and be at least 18)
There’s usually no credit check with these lenders, so it generally only takes a few minutes to get approval after you apply. If approved, they’ll send you a bank deposit. As part of the contract, you authorize the payday loan or cash advance app company to withdraw the loan amount plus its fee from your bank account the next time you get paid.
Many people use this method to pay for unexpected expenses and emergencies, or to cover bills until their next payday. But access to instant cash comes at a high price. Although loan amounts are typically $500 or less, you could be paying $10 to $30 for each $100 borrowed on a payday loan.
A cash advance app is almost identical in process. But the fees are generally smaller. Some apps charge a monthly subscription fee or request tips at repayment instead.
Learn More: How Do Payday Loans Work?
For example: Let’s say you need to borrow $400 for the next two weeks. You take out a payday loan that charges $15 per $100 you borrow. You would repay a total of $460 — A 391.07% APR.
Instead, you could use a cash advance app to borrow the $400. The app doesn’t charge interest, but asks for a 5% tip at repayment. You’d repay a total of $420 — that’s an APR of 130.36%. Without the optional 5% tip, you’d avoid that high rate.
Pros and cons of a payday advance
Here are a few benefits and drawbacks to consider.
Pros
- Extremely accessible: Whether you choose to get a payday loan online or in person, there’s no shortage of options and there’s often no credit check.
- Quick access to funding: Payday loans are usually approved within minutes and paid out within the same day or the next day.
- Helps you pay for urgent needs: When you’re out of options and need cash to pay for an emergency, payday loans are expensive, but could mean you can pay for it.
Cons
- Exorbitant rates: In some cases, you’re paying an equivalent of up to 400% APR for a two-week borrowing term.
- Excessive fees: These loans often come with origination fees, prepayment penalties, late fees, and renewal fees that add to your balance.
- Prohibited in multiple states: High-cost payday lending is illegal in 16 states, D.C., and multiple territories.
- Can create an almost inescapable debt cycle: Deducting interest and fees from your paycheck could make you reliant on payday loans to cover a lack of income. In states without regulations, payday loans can “rollover” your unpaid balance to a new loan and charge you for it.
Payday loan online lenders
Consider all of your other options before choosing a payday advance online. If you have no choice and payday loans are legal in your state, this lender is transparently priced and appears reputable, but proceed with caution.
Possible Finance
Possible Finance offers small loans of up to $500 that you repay within four payments. There are no late fees or penalty fees and they report your payment history to TransUnion and Experian to help you build credit.
The negative is how much the loans cost. Possible Finance’s annual percentage rates (APR) — which account for the interest rate plus fees — are generally around 150%. For comparison, APRs on personal loans for those with bad credit generally top out around 36%.
Other online loan options for bad credit
The following lenders don't offer traditional payday loans, but may be a good option if you need a longer repayment term or higher loan amount.
60 Month Loans
60 Month Loans provides loan amounts between $2,000 and $10,000 without a credit check. The repayment terms are also much longer than a typical payday loan, up to five years. Once approved, you should receive the loan funds within one to a few business days.
Relative to other bad-credit loans, the fees for 60 Month Loans appear reasonable. In states like South Carolina and Delaware, for example, 60 Month Loans charges a 7% loan fee and APRs of 35.72%.
OppLoans
OppLoans offers loan amounts from $500 to $4,000 with repayment periods between nine and 18 months. The maximum APR is 179%, which is high, but not as high as some payday loans (you'll need to apply to see your APR). You need to be paid via direct deposits to be eligible, and the company performs a soft credit check when you apply. OppLoans reports to the credit bureaus, which can help you improve credit (if you make payments on time).
Learn More: Short-Term Loan Options
Alternatives to a payday advance
There are several less costly alternatives to borrowing money through a payday advance loan.
- Consider a cash advance app: A cash advance is similar to a payday loan in that you’ll repay the amount on or by your next payday. But cash advance apps typically have lower or no fees, which makes for much lower APRs. However, if you pay a subscription fee to use the service or provide a tip, you can increase the APR substantially, depending on the subscription fee and/or tip.
- Take out a payday alternative loan (PAL): The APR on a PAL tops out at 28%, and the application fee can be no more than $20. Plus, repayment terms can last months, as opposed to 1 or 2 weeks.They’re available from credit unions, so you’ll need to be a member to qualify. Since they’re designed as an alternative to payday loans, qualification is otherwise relatively easy.
- Borrowing money from friends or family: The people who care about you are more likely to lend you money without charging interest. Make sure you’re timely in repaying them.
- Using a credit card: Although credit cards are high-interest revolving debt, they’re the lesser of two evils compared to a payday loan. If you can pay off your balance before the end of the billing cycle, you could save on interest.
- Pick up a side gig: Make some extra money by picking up work after your day job such as food delivery, ride-share driving, part-time retail work, or dog-walking.
- Ask for extra time with your creditors or set up a payment plan: Your bill collectors might give you extra time to pay if you let them know your situation. Some might even offer a payment plan that gradually gets you back on track.
- Use a personal loan from a bank or credit union: Even if you have poor or fair credit, you could still qualify for a personal loan from some banks or credit unions. The terms are more affordable than a payday loan, and you’ll have longer to pay it back.
Keep Reading: Types of Emergency Loans
Personal loan vs. payday advance loans
If you’re considering a payday advance loan, you might think you’re stuck with poor choices. But there’s lower-cost borrowing available through personal loans. Here are the primary differences between them:
- Interest rate: Personal loans have fixed payments and a fixed interest rate, while payday loans typically have compounding interest.
- Credit check: Payday advance loans don’t require a credit check in most cases. Personal loans typically do, and that hard credit inquiry can ding your score by a few points temporarily.
- Loan amounts: Personal loans offer larger loan amounts ranging from $1,000 to $50,000 on average. Payday advance loans are usually for much smaller amounts — $500 or less.
- Repayment terms: Repaying a personal loan generally happens over 1 to 7 years, but the term could be longer depending on the loan type and lender. Payday loans withdraw repayment from your account by your next payday (usually about two weeks).
Learn More: Payday Loans vs. Personal Loans
| Features | Personal loan | Payday advance loans |
| Repayment terms | Typically 1 to 7 years | Next payday |
| Loan Amounts | $1,000 to $50,000 or more | $500 or less |
| Average interest rate | 11.48% on a 2-year loan, as of May 2023 | 400% |
| Time to funding | 1-3 days for most lenders | Same day or next day |
All APRs reflect autopay and loyalty discounts where available | LightStream disclosure | SoFi Disclosures | Read more about Rates and Terms
FAQ
Do payday loans build credit?
Typically, payday loans don’t build credit. The payments on these loans aren’t reported to the three major credit bureaus. In most cases, the only time payday loan lenders report to the bureaus is if your account gets sent to collections, which harms your score.
What happens if you default on a payday loan?
Defaulting on payday loans has serious consequences. Payday lenders usually keep trying to withdraw payment from your bank account if you default. This could create multiple overdraft or non-sufficient funds fees from your bank. The missed payments also come with hefty fees that add to your balance. If lenders still can’t collect payment, they’ll send your account to collections, which can tank your credit score.
Can you get a payday loan with bad credit?
Most likely, yes. Payday advance loans typically offer loans without a credit check by using other factors to approve you. Bad-credit borrowers might see them as a solid option, but sky-high APRs and fees make these loans harder to repay.
Should I get a payday advance online or a personal loan?
A personal loan is less expensive compared to a payday loan. If you need a larger amount to pay for emergencies, a personal loan is arguably better. Some personal loan lenders even use factors outside your credit score to qualify you, so even if you have bad credit, a personal loan is likely still an option.
Related: Are Payday Loans Safe?
