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How Payday Loans Work — And Why You Should Avoid Them

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how payday loans work
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You’ve probably heard that payday loans are bad news. There are plenty of reasons for the stigma surrounding this product. Filling in financial gaps with payday loans can lead to a vicious debt cycle.

According to a report released by Pew, the average borrower who takes out a payday loan is in debt for five months and spends an average $520 in fees while repeatedly borrowing $375. Similarly, the Consumer Financial Protection Bureau found that over 80% of payday loans roll over or borrowers take out another payday loan within 14 days.

In this post, we’ll discuss what exactly a payday loan is, why it’s dangerous and alternatives to consider when money is tight.

What is a payday loan?

A payday loan is a short-term loan of a small amount, typically $1,000 or less, that you’re meant to pay back the next time you receive a paycheck. Payday loans can also be called cash advance loans or check loans. If you can’t pay the loan by your next payday, the lender may allow you to roll over the loan into a new term for an additional fee. You can often find payday loans at check cashing places in strip malls.

Payday loans are typically used by low-income borrowers who need access to quick cash to pay everyday bills. A Pew survey found that payday loan borrowers typically earn less than $40,000 per year.

The fees and interest are where the red flags appear: “I’ve seen [interest rates] upwards of 700%,” said Natalie Fountain, a financial wellness expert at GreenPath, Inc., a financial wellness nonprofit.

The cost of a payday loan isn’t always expressed as a percentage. Instead, it may be called a “finance charge,” but when calculated as an APR, it can be astronomical. The average fee, according to Pew, is $55 per loan from a storefront lender and $95 on average for a payday loan offered online.

Fees can vary from lender to lender. Fountain, based in Farmington Hills, Mich., has seen instances where borrowers have to pay a fee per dollar amount. For example, the borrower pays $15 to $40 per $100.

Let’s say you borrow $500, there’s a $20 fee per $100 and you renew at the end of the two-week period for another $50 fee. The loan would cost you $150 in one month. Imagine you kept renewing. After just five months, the total fees would surpass the original $500 loan.

Fees should be stated in the contract you sign. Read all documents with an eagle’s eye. Some states set a maximum fee for payday loans. Other states prohibit payday loans entirely.

Why payday loans are dangerous

Payday loans are often advertised as products to help you cover unexpected bills. However, a majority of borrowers use them for everyday expenses to solve an income gap.

“Most of what I see is people rolling over or renewing the loan. That’s when people get caught in the cycle of the loan and never get out of it,” said Fountain. Over the years, she has found that some people are able to pay it back in two weeks or maybe a month, but many become trapped in debt.

The real danger of payday loans is getting into the pattern of only paying the renewal fees when the loan is due because that fee is all you can afford. The fees may not seem problematic for a short term when you’re in a pinch. But repeatedly borrowing can turn it into a long-term situation that digs you into a deep hole.

Payday loans are easy to get

Payday loans don’t have many requirements, which is what makes them so easy to access. “You can get [payday loans] almost immediately. There’s really no wait, and almost everyone can get one,” Fountain said. A credit check may not be required. In fact, Fountain has worked with borrowers who have payday loans that don’t show up on their credit reports at all. Payday lenders may not report accounts to bureaus.

The one requirement payday lenders do typically have is that you write a post-dated check for the balance or give them direct access to your bank account for the payment. Giving a lender authorization to make bank withdrawals is another area that can cause problems.

A withdrawal can trigger an overdraft if you don’t have enough money when the payment is due. On top of struggling to repay a loan, you could have overdraft fees and a negative account balance to rectify with your bank.

How to resolve your payday loan woes

We’ve driven the point home about the dangers of payday loans. What if you already have payday loans that you’re trying to recover from? There are solutions.

Fountain recommends slowly backing down on the loan. If you have a loan that you keep renewing, try to borrow less each time you renew. For example, if you have a $1,000 payday loan that you keep paying just a renewal fee on, borrow $800 on your next go around and so on until the debt is paid off.

Another option is signing up for a debt management program with a credit counseling organization. Counselors can possibly negotiate better terms like a monthly payment as opposed to one lump sum that’s challenging to pay off.

If you’re buried under multiple debts, you may also consider debt consolidation. That’s where you get a new loan to pay off your existing debts. The new loan should have a lower interest rate and better terms to make repayment easier — or at least lower your overall debt costs. You can see offers from up to five different lenders by using this personal loan tool from LendingTree.

Learn more about how to dig your way out of payday loan debt here.

5 better alternatives to payday loans

Below are some alternatives to review before you settle with a payday loan:

1. Consider peer-to-peer (P2P) lending

Don’t shy away from long-term loans. Short-term loans may seem better because it’s marketed as a shorter commitment. But when you take into account factors like high interest, high fees and unmanageable lump-sum payment requirements, a long-term loan is likely a better solution.

Peer-to-peer loan products can have flexible qualifying criteria for those with less-than-stellar credit. LendingClub and Peerform are examples of P2P online marketplaces where you can get a loan funded by peer investors if you have a credit score of at least 600.

Interest rates for these products currently range from 5.99% to 35.89% APR. You can shop for P2P loans online with a soft inquiry. It’s possible to apply and get funding within a few business days. A P2P loan works like a traditional installment loan where you pay a set amount monthly for a term that can be 36 to 60 months. Shop for P2P loans and other personal loans here.

2. Try a credit card

Credit cards get a bad rap because excessive use of them can also land you in a debt trap. But when used responsibly, credit cards can be a more affordable way to borrow money than payday loans. The average credit card interest rate is currently 14.38% compared with the triple-digit interest rates that you can find with a payday loan.

Credit cards may offer a cash advance option as well, although cash advances may have a higher APR and can come with a cash advance fee of 3% or 5%. However, there are some credit cards that don’t have a cash advance fee.

The application for credit cards is fairly quick. You can apply online and get an instant response. It can take a few weeks for the physical card to come in the mail to activate the account. Compare credit card offers here.

3. Work with your local bank or credit union

Sometimes a local bank or credit union may be willing to lend you a small amount if you’re a loyal customer or member. Speak with your financial institution to see if there are affordable products available.

One product to ask your credit union for is the payday alternative loan or PAL. PALs are small loans that may be offered as a solution for members when money is tight. PALs are typically $200 to $1,000 and can have loan terms of one to six months. These products may come with administrative fees of up to $20.

4. Borrow from friends and family

If you need quick cash and you can’t wait for a loan or credit card, asking friends and family for a favor can get you out of a tough spot. Set up a repayment agreement to avoid awkward conversations about when you’ll pay the money back.

5. Work out bill arrangements and lower your expenses

Jump on the phone before bills get out of control. Try to contact companies you owe money instead of leaning on payday loans to bridge the gap between paychecks. You could ask for bill extensions or a payment plan.

Another proactive step is to lower your monthly bills where you can. Cut the cord on cable. Negotiate a lower rate for your telephone bill and other services. Take on a roommate. Start a side hustle. Reducing expenses and increasing your income can help you avoid short-term loan products for everyday living expenses.

Shop around before making a decision

When bills are due, it’s understandable that you look for the quickest way to solve the problem. Take a deep breath and consider alternatives before going to your local check advance storefront for money. Weighing your options can help you avoid taking a course of action that can put you in even more financial trouble.

This article contains links to LendingTree, our parent company.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Taylor Gordon
Taylor Gordon |

Taylor Gordon is a writer at MagnifyMoney. You can email Taylor here

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Where Educated Workers Are Moving

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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As shown by the bidding process for the new Amazon headquarters, states and cities will do just about anything to attract a high-income, highly educated workforce. The benefits of doing so are obvious: those workers’ high incomes create demand for many other ancillary services and products boosting the overall employment level. Additionally, from the local government’s perspective, these workers create a reliable tax base.

Where these companies and workers decide to move says a lot about their preferences today. But maybe more importantly, where these workers decide to move reveals which states may be the economic winners of tomorrow.

In order to understand these trends, we utilized migration data from the Integrated Public Use Microdata Series (IPUMS). Using this data set, we found out which states workers with bachelor’s degrees (ages of 25 to 65) were moving between 2016-17.

Key findings

  • Florida is the biggest winner with a net gain of nearly 19,000 bachelor degree-holding workers. The state is probably more famous for attracting an older, non-working population, but — thanks to its low cost of living and low taxes, perhaps — bachelor degree-wielding workers are also flocking to the Sunshine State.
  • The Orlando and Tampa metro areas are the major attractors in Florida, taking in a net flow of 8,500 and 4,400 educated workers respectively.
  • Arizona and Texas, two other warm, low cost-of-living states, also took top spots, with Phoenix and Dallas servings as the most popular relocation spots within their states. Texas came in second with a net flow of more than 14,400 educated workers, while Arizona took fourth with nearly 11,840. Interestingly, Arizona has a relatively low total population, so scoring the fourth-highest net flow is particularly impressive.
  • One state mirroring the trend of affordability and low taxes is Colorado, which earns the No. 3 best spot on this list. This state attracted 38,817 educated workers while losing just under 25,700, for a net increase of about 13,100. Denver is also notable as one of America’s biggest boomtowns.
  • Illinois was the second largest loser with a net loss of nearly 19,500 educated workers. The Chicago metro area led the charge in this state, with migration data showing losses of roughly 13,400 bachelor degree-holding workers. It is worth pointing out, though, that the metro area also encompasses territory in Indiana and Wisconsin and is not the only reason for Illinois’ overall losses.
  • New York City, with its unfortunate reputation as being one of the most expensive places in the country, was the biggest loser for metro areas, with a net loss of 19,269 educated workers. A large number of New York residents would actually prefer to live elsewhere, with losses of nearly 49,000 people between 2017 and 2018, according to Census Bureau data. However, similar to Chicago, the New York City metro area also includes people living in New Jersey and Pennsylvania, and is not the sole cause of its state’s losses.
  • Educated workers are not alone in leaving New York state and its namesake city: Census Bureau data shows the overall population of the famed urban area has declined for two straight years now. That may be due, at least in part, to migration to nearby New Jersey. There’s been a large growth in population in the state of late, including cities just across the Hudson River from Manhattan, like Jersey City and Hoboken.

Top states in our rankings

Florida tops our rankings, netting nearly 19,000 workers over the 2016-17 period we measured. The next-highest net gain was just under 14,500, in Texas. But the Southeast had other winners in the top 10: North Carolina (No. 5) and South Carolina (No. 9).

Those with the lowest influx of educated workers are more common in the central and eastern parts of the country. States around the Great Lakes — Wisconsin, Illinois, Indiana, Ohio — fared poorly in our rankings, though Michigan came in at No. 15 overall. In the Northeast, meanwhile, New York came last in our rankings, with a net flow of -23,007 workers. Massachusetts (-7,223) and Pennsylvania (-5,371) also found themselves in the bottom five.

Southeastern states were a mixed bag — Louisiana, Mississippi, Alabama and Georgia are in the red, while Florida and North Carolina land the first- and fifth-best spots on this list, respectively.

1. Florida

With over 60,000 educated workers flowing into the state, Florida is the ultimate hot-spot for workers who have relocated. And when you look at the stats, it’s easy to see why.

The median household income for those who live within the state is just over $50,000. Nearly 65% of residents own their homes, which have an overall median value of about $180,000. Plus, only about 3.5% of the overall population are unemployed, as of March 2019.

The cost of living is relatively affordable, too. Homeowners with mortgages pay about $1,400 per month on housing, while renters pay $1,077 per month.

2. Texas

Coming in with a higher influx of Bachelor-degree holding workers than Florida (but a lower overall net), is Texas. The Lone Star State boasts a median household income of about $57,000 per year, and it has an overall unemployment rate of just 3.8%. Its housing costs for renters are also a bit cheaper than the No. 1 state on this list, coming in at $952 per month. It’s also worth noting that Austin was the third most-popular destination for millennials on the move, according to our ranking of millennial boomtowns.

3. Colorado

Colorado is another popular destination for workers moving out of state.

Working women in the Denver metro area, for example, are doing well there — an impressive 65.4% of women have employee-provided health insurance, about 40% of managers are women, and just 4.2% are unemployed, according to our study on the best cities for working women. In fact, the metro area earned the fifth-best ranking for those workers, compared to other U.S. cities. It’s also popular among millennials — Denver experienced the second-largest influx of that demographic, compared to other cities, between 2011 and 2016.

4. Arizona

Home to vast deserts and the Grand Canyon, Arizona is also experiencing an influx of workers. It’s a popular place for homeowners — 63.1% of Arizonans own their home, and the median value for those homes is $193,200. Renters, on the other hand, pay an average of $972 per month for their spaces. Compared to the overall average household income for state residents, which is a little more than $53,000, that accounts for about 20% of annual earnings.

Arizona is also a good option when you consider high-interest debt. Our study on U.S. credit card debt found that Arizona residents tend to carry less credit card debt ($4,299.70) than the average American ($6,358). However, it does have a slightly higher unemployment rate (5.0%) than you would find in Florida (No. 1) or Texas (No. 2).

5. North Carolina

Rounding out the top five, North Carolina has proven itself to be a popular destination for workers who move across state lines. And it does have some desirable factors going in its favor.

Unemployment (which stands at 4.0% as of March 2019) has been on a steady decline since the recession. And the median household income is comparable to what you might find in Florida (No. 1) or Arizona (No. 4). Plus, residents enjoy an average commute of fewer than 30 minutes.

However, it’s worth pointing out that the state is also home to the lowest-ranked metro area for working women — its most populous city, Charlotte — with gendered underrepresentation in leadership roles.

View our complete rankings

The figures below are based on the number of bachelor’s degree-holding individuals who have moved across state lines, either in or out of a particular state. Net flow is calculated by taking the total “moving in” minus amount of those “moving out.” Entries are also listed in order of net flow, from the most popular to least popular states for educated workers.

Interestingly, the top-five states are the only ones on this ranking which achieved five-figure net flow status. And all states which fall below the 23rd-best rated option (Arkansas) have a negative net flow, meaning more people are leaving than coming in.

It’s also worth noting that the moving-in and moving-out figures vary quite a bit from state to state. Georgia’s (No. 38) moving-in figure, for example, is nearly 30,000 (which is more than some of the top-ten ranking states on this list), while Vermont’s (No. 26) moving-in figure is just 2,003.

Moving for opportunity: How to afford the expense

Moving almost always brings up a mix of excitement and nerves. But for those who aren’t sure if they can afford the expense, it tends to lean more toward nerves. While tight finances, or a lack of funds, aren’t ideal when contemplating that kind of life change, there are ways to make it work.

Creating a budget and starting to save is the best first step if your move is still a ways off. Some of the usual expenses that renters should plan for include:

  • Security deposits (keep in mind that those with pets may be required to pay an additional deposit, and your landlord may ask for pet rent)
  • First (and possibly last) month’s rent
  • Transportation costs (like airfare) for you and your family
  • Shipping costs for your belongings
  • Packing materials, like boxes and tape
  • Storage costs (if, for example, your stuff doesn’t fit in your new apartment)
  • Cash for tipping movers
  • Repairs and new purchases to fix, furnish or decorate your new place

Trimming expenses for your move

Delaying your move to give yourself time to save can help avoid taking on debt — but that isn’t always possible. Still, if you’re willing to do a bit of work, you can minimize your expenses through other means.

If you’re planning on using professional movers, for example, it’s vital to shop around for the best rate by asking for estimates from local companies (while you’re at it, check out reviews to make sure your items would be in good hands.) Curbing personal spending is another thing to keep in the front of your mind as you come up to your move date. It’s also worth checking out other options, like having family members pitch in with packing supplies or transportation, renting a moving truck instead of using movers, or opting to move on during the week rather than during the weekend (or around a holiday).

You may also choose to streamline your belongings to cut down on moving costs. (Selling those items through an app like LetGo or on a site like Craigslist could also help you fund your move.)

It’s also a good idea to consider asking your employer if they would be willing to cover some of your relocation costs, especially if you’re moving for a new job or you have a good track record with your current company. While approval for that certainly isn’t a guarantee, it is possible and can help you save, so it may be worth the ask.

Using a personal loan for moving expenses

For those with strong credit, a personal loan might be a good option to fund your move. In general, the better your credit, the better the loan terms you’ll qualify for, and the less it will cost you to borrow. Personal loans can help you avoid putting large balances on a high-interest credit card and thereby save you money, long-term.

However, they aren’t a fix-all: You’d still have to qualify first, then pay interest charges and keep to the monthly repayment schedule to avoid late fees. But for the right borrower, they can provide a bit of breathing room and help get your move funded, faster.

Methodology

In order to find where educated workers are moving, researchers analyzed IPUMS migration over the 2016-17 period. Specifically this analysis tracked the movements of people in the workforce who moved across state lines. Researchers compared the number who moved into a state to those who moved out of the state. The states were then ranked by net flow (the difference between immigration and emigration).

Statistics on individual states comes from the United States Census Bureau and the Bureau of Labor Statistics, unless otherwise noted.

This article contains links to LendingTree, our parent company.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Devon Delfino
Devon Delfino |

Devon Delfino is a writer at MagnifyMoney. You can email Devon here

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No Credit, or Poor Credit? Here Are Your Loan Options

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Disclosure : By clicking “See Offers” you’ll be directed to our parent company, LendingTree. You may or may not be matched with the specific lender you clicked on, but up to five different lenders based on your creditworthiness.

Mixed Race Young Female Agonizing Over Financial Calculations in Her Kitchen.

Updated June 03, 2019
Don’t have a credit history established, or have a low credit score? It can be challenging to find lenders that will approve you if you have a thin credit file or poor credit, but it’s not impossible.

You still have options when it comes to personal loans, and these options come from reputable lenders.

What’s even better is that these lenders will only conduct a soft credit inquiry when you apply to find out what rates they can offer you. This means your credit score won’t be negatively affected, so you don’t have to worry about damaging it further.

In this article we’ll review how to find reputable lenders, why you should stay away from two popular options people turn to when they’re in a poor credit situation: payday and title loans. And what you can do to increase your credit score.

Check for approval without a credit hit

It’s worth noting low scores aren’t always indicative of how responsible you are with credit. A low score, or thin file, could just be a result of a short credit history. If you have a clean history (no late payments, low credit utilization, etc.), you’ll have an easier time obtaining a loan over someone who has had delinquencies on their record, but might have a higher score.

If you have bad (or no) credit, you should apply to as many lenders as possible that use a soft pull to ensure you don’t hurt your credit score. We recommend starting with LendingTree, where you can use one short application form to get rates from multiple lenders at one.

Company
APR
Terms
Credit Req.
LendingTree

As low as 3.99%

24 to 60

months

Minimum 500 FICO®

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A Personal Loan can offer funds relatively quickly once you qualify you could have your funds within a few days to a week. A loan can be fixed for a term and rate or variable with fluctuating amount due and rate assessed, be sure to speak with your loan officer about the actual term and rate you may qualify for based on your credit history and ability to repay the loan. A personal loan can assist in paying off high-interest rate balances with one fixed term payment, so it is important that you try to obtain a fixed term and rate if your goal is to reduce your debt. Some lenders may require that you have an account with them already and for a prescribed period of time in order to qualify for better rates on their personal loan products. Lenders may charge an origination fee generally around 1% of the amount sought. Be sure to ask about all fees, costs and terms associated with each loan product. Loan amounts of $1,000 up to $50,000 are available through participating lenders; however, your state, credit history, credit score, personal financial situation, and lender underwriting criteria can impact the amount, fees, terms and rates offered. Ask your loan officer for details.

As of 28-Feb-2019, LendingTree Personal Loan consumers were seeing match rates as low as 3.99% (3.99% APR) on a $10,000 loan amount for a term of three (3) years. Rates and APRs were based on a self-identified credit score of 700 or higher, zero down payment, origination fees of $0 to $100 (depending on loan amount and term selected).

6.95%-35.89%

36 or 60

months

600

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7.46%-35.99%

36 & 60

months

620

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We'll receive a referral fee if you apply for this loan. This does not impact our rankings or recommendations.

9.95%-35.99%

24 to 60

months

Varies

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Avant branded credit products are issued by WebBank, member FDIC.

6.95%-35.99%

36 or 60

months

640

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For example, a three-year $10,000 loan with a Prosper Rating of AA would have an interest rate of 5.31% and a 2.41% origination fee for an annual percentage rate (APR) of 6.95% APR. You would receive $9,759 and make 36 scheduled monthly payments of $301.10. A five-year $10,000 loan with a Prosper Rating of A would have an interest rate of 8.39% and a 5.00% origination fee with a 10.59% APR. You would receive $9,500 and make 60 scheduled monthly payments of $204.64. Origination fees vary between 2.41%-5%. APRs through Prosper range from 6.95% (AA) to 35.99% (HR) for first-time borrowers, with the lowest rates for the most creditworthy borrowers. Eligibility for loans up to $40,000 depends on the information provided by the applicant in the application form. Eligibility is not guaranteed, and requires that a sufficient number of investors commit funds to your account and that you meet credit and other conditions. Refer to Borrower Registration Agreement for details and all terms and conditions. All loans made by WebBank, member FDIC.

59.00%-199.00%

9 to 24

months

Varies

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LendingTree: Dozens of lenders partner with LendingTree – and many of them may approve people with poor or no credit. You can fill out a simple form and compare multiple offers in minutes. We highly recommend starting your shopping experience here first to have a good chance of getting a loan.

LendingTree
APR

As low as 3.99%

Credit Req.

Minimum 500 FICO®

Minimum Credit Score

Terms

24 to 60

months

Origination Fee

Varies

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LendingTree is our parent company. LendingTree is unique in that you may be able to compare up to five personal loan offers within minutes. Everything is done online and you may be pre-qualified by lenders without impacting your credit score. LendingTree is not a lender.


A Personal Loan can offer funds relatively quickly once you qualify you could have your funds within a few days to a week. A loan can be fixed for a term and rate or variable with fluctuating amount due and rate assessed, be sure to speak with your loan officer about the actual term and rate you may qualify for based on your credit history and ability to repay the loan. A personal loan can assist in paying off high-interest rate balances with one fixed term payment, so it is important that you try to obtain a fixed term and rate if your goal is to reduce your debt. Some lenders may require that you have an account with them already and for a prescribed period of time in order to qualify for better rates on their personal loan products. Lenders may charge an origination fee generally around 1% of the amount sought. Be sure to ask about all fees, costs and terms associated with each loan product. Loan amounts of $1,000 up to $50,000 are available through participating lenders; however, your state, credit history, credit score, personal financial situation, and lender underwriting criteria can impact the amount, fees, terms and rates offered. Ask your loan officer for details.

As of 28-Feb-2019, LendingTree Personal Loan consumers were seeing match rates as low as 3.99% (3.99% APR) on a $10,000 loan amount for a term of three (3) years. Rates and APRs were based on a self-identified credit score of 700 or higher, zero down payment, origination fees of $0 to $100 (depending on loan amount and term selected).

Here are 5 personal loan lenders for people who have less than ideal credit (meaning under 700) that will let you check your rate without impacting your credit score:

LendingClub: People with credit scores below 600 may get approved. You can borrow $1,000 – $40,000 and get the money deposited into your account within a few days. Fixed APRs range from 6.95% –35.89% on monthly terms of 36 or 60. LendingClub has an origination fee of 1.00% - 6.00% its loans. LendingClub is not available in Iowa or West Virginia.

APR

6.95%
To
35.89%

Credit Req.

600

Minimum Credit Score

Terms

36 or 60

months

Origination Fee

1.00% - 6.00%

SEE OFFERS Secured

on LendingTree’s secure website

LendingClub is a great tool for borrowers that can offer competitive interest rates and approvals for people with credit scores as low as 600.... Read More

Upstart: Borrow between $1,000 and $50,000 for 36 & 60 months with APRs ranging from 7.46% to 35.99%. While the minimum credit score needed to qualify is 620 (Upstart will also consider applicants who don’t have a score), you must have a clean credit history. You could also be eligible for next day funding.

APR

7.46%
To
35.99%

Credit Req.

620

Minimum Credit Score

Terms

36 & 60

months

Origination Fee

0.00% - 8.00%

SEE OFFERS Secured

on LendingTree’s secure website

Upstart is an online lender created by ex-Googlers.... Read More

Avant: You could borrow anywhere from $2,000 to $35,000 through Avant, and you could receive your funds as soon as the next business day. APRs range from 9.95% – 35.99%. Although the minimum credit score Varies, you have a much better chance if your score is above 580. Avant is available in all states except Colorado, Iowa, West Virginia, and Vermont.

APR

9.95%
To
35.99%

Credit Req.

Varies

Minimum Credit Score

Terms

24 to 60

months

Origination Fee

Up to 4.75%

SEE OFFERS Secured

on LendingTree’s secure website

Avant branded credit products are issued by WebBank, member FDIC.

Avant is an online lender that offers personal loans ranging from $2,000 to $35,000. ... Read More

Prosper: Another peer-to-peer marketplace lender, Prosper’s loans are similar to LendingClub’s. You can borrow $2,000 to $40,000 with APRs ranging from 6.95% to 35.99% on 36 or 60 month terms. There’s an origination fee of 2.41% - 5.00%, and its minimum credit score is 640.

APR

6.95%
To
35.99%

Credit Req.

640

Minimum Credit Score

Terms

36 or 60

months

Origination Fee

2.41% - 5.00%

SEE OFFERS Secured

on LendingTree’s secure website

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Prosper is a peer-to-peer lending platform that offers a quick and convenient way to get personal loans with fixed and low interest rates. ... Read More


For example, a three-year $10,000 loan with a Prosper Rating of AA would have an interest rate of 5.31% and a 2.41% origination fee for an annual percentage rate (APR) of 6.95% APR. You would receive $9,759 and make 36 scheduled monthly payments of $301.10. A five-year $10,000 loan with a Prosper Rating of A would have an interest rate of 8.39% and a 5.00% origination fee with a 10.59% APR. You would receive $9,500 and make 60 scheduled monthly payments of $204.64. Origination fees vary between 2.41%-5%. APRs through Prosper range from 6.95% (AA) to 35.99% (HR) for first-time borrowers, with the lowest rates for the most creditworthy borrowers. Eligibility for loans up to $40,000 depends on the information provided by the applicant in the application form. Eligibility is not guaranteed, and requires that a sufficient number of investors commit funds to your account and that you meet credit and other conditions. Refer to Borrower Registration Agreement for details and all terms and conditions. All loans made by WebBank, member FDIC.

OppLoans: If you have no or bad credit, Opploans is an online lender that could help. If your credit score is below 0 (or if you have no credit score at all), OppLoans will work with you. You can check to see if you are approved without impacting your score. And – unlike payday lenders – OppLoans offers much more affordable borrowing options. They also have great reviews – with a customer service rating of 4.9/5 stars.

APR

59.00%
To
199.00%

Credit Req.

Varies

Minimum Credit Score

Terms

9 to 24

months

Origination Fee

Varies

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on LendingTree’s secure website

There are several other personal loan lenders that will do a soft credit check. You can find them on our personal loan table here. While many of these lenders have minimum credit score requirements, you’ll find they take other factors into account aside from your FICO score.

Additionally, since these lenders only do a soft credit pull, you’re free to shop around for the best rates without fear of damaging your credit score.

Why You need to Stay Away from Payday Loans and Title Loans

Not eligible for personal loans? Don’t turn to payday loans or title loans.

If you’re not familiar with either, you might be wondering what’s so bad about them. After all, they seem convenient – most offer “fast cash,” and if you live in a populated area, you’ll probably find a payday loan or title loan shop nearby.

However, both require you to give something in exchange for funds, and neither require any sort of stringent approval process to ensure borrowers can afford the loans.

Payday Loans

Payday loan companies require you to write a check for the amount you wish to borrow, plus a set fee. The lender holds onto the check until the loan becomes due (typically on the borrower’s next payday, hence the name), and gives the borrower the money they need in the meantime.

The problem? If you can’t pay when the loan balance becomes due, you can choose to extend the term of the loan. When you do, you get hit with more fees. The APR on payday loans is extremely high, so you’ll pay more each time you extend your loan term.

Payday loans are on the smaller side – anywhere from $100 to $1,000. According to PayDayLoanInfo.org, the average term is two weeks, with 400%+ APRs. When you factor in fees, the APR can go up to 780%.

[Stuck in a Payday Loan Trap? Here are the ways out.]

Title Loans

Title loans require you to give your car’s title to the title loan company in exchange for an amount equal to the appraised value of your car. You usually have to own your car outright to be eligible for a title loan, and the term is around 30 days.

Like payday loans, if you can’t pay on time, you may choose to roll the loan over to the next month, incurring more fees. If you can’t pay back the loan at all, you run the risk of the lender repossessing your car.

As you can tell, both of these options are bad ideas if you want to stay clear of getting into a horrible debt cycle. These loans are purposely too expensive for borrowers to afford. If people are looking for quick cash because they don’t have any, it stands to reason they’ll be in the same situation a week or two from the time they borrow.

Non-Profit Credit Counseling to Rebuild Credit Score

You want to make every effort to improve your credit score, even after you’re approved for a loan, because having a good credit score will benefit you in other areas of life. For that reason, you might want to consider teaming up with a non-profit credit counseling service.

These companies can provide you with personalized advice on your specific situation so you can work on rebuilding your credit score. They can also work with your creditors and negotiate on your behalf to possibly lower interest rates or get better terms on your existing debt.

It can be tricky to find a reputable credit counseling agency – even with a non-profit organization. If you’re interested in a credit counseling service, USA.gov lists a few considerations and questions you should ask before committing. You want to make sure the credit counseling agency is actually going to help you get your credit and financial situation under control.

Alternative to Ways to Build Your Credit Score

If you don’t qualify for a personal loan, and don’t want to turn to payday or title loans, there are a few steps you can take to increase your credit score. This post has 6 tips to help get you started. These methods won’t boost your score immediately, but over time, you’ll see an improvement.

The Federal Trade Commission also has 6 alternatives to payday loans on its website, which might apply to your situation. For example, if you’re a member of a credit union, you could inquire about a loan through them as you have an established relationship already.

Also, if you haven’t started budgeting and tracking your spending, you should – doing so can help you spot problem areas with your money.

Read the Fine Print and Shop Around

Regardless of which loan you decide to apply for, always consider the cost. You want to make sure you’re getting the best possible terms, which means getting the lowest APR offered. Typically, cash advances and credit cards are going to have higher APRs than personal loans but lower than payday lenders.

Remember to always read the fine print. Loans of any type have plenty of fees associated with them that you should avoid. Shop around for the best deals and work on improving your credit score so better options become available to you.

*We’ll receive a referral fee if you click on offers with this symbol. This does not impact our rankings or recommendations. You can learn more about how our site is financed here.

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Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Erin Millard
Erin Millard |

Erin Millard is a writer at MagnifyMoney. You can email Erin at [email protected]

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