Different Types of Fast Loans
Fast Doesn’t Mean Cheap
Emergencies never seem to happen at a convenient time. When you don’t have cash available to handle them, you may be tempted to turn to sources offering fast loans.
So, where can you borrow quickly? Unfortunately, the fastest loans can also be the most expensive borrowing options. Still, it’s helpful to know what your choices are.
- Personal loans have relatively low APRs with an extended payoff period, making payments more affordable.
- Payday Alternative Loans (PALs) from some credit unions can provide small loans at a reasonable price.
- Payday loans provide instant cash at relatively high financing rates.
- Title loans allow you to borrow against your vehicle, but the fees can be steep.
- Pawn shops give you money for your belongings, and the goal is typically to repay the loan instead of selling.
We'll talk about each of these in further depth below. But first, it's important to get some context.
Avoid Predatory Lenders
Banks might not have the best reputation for low-cost products, but when it comes to borrowing, you can do worse than banks and credit unions. Traditional loans may take slightly longer than storefront loans, but don’t rule out banks and credit unions—you may be able to receive funds quickly.
Loans that specifically advertise quick funding tend to charge a premium. You may need to pay high interest rates or high fees to receive cash, and doing so could worsen your financial challenges. If you have no better options and you need the money (for a medical emergency, for example), it may make sense to borrow at a high cost. But before you do that, rule out the alternatives.
With personal loans, you apply for funding from a bank, credit union, or online lender. Personal loans do not require that you pledge collateral to qualify. Instead, lenders evaluate your income and credit history to determine whether or not to approve your application.
- Credit: Lenders review your credit reports to see if you’ve borrowed money in the past and repaid your debts. Other factors go into your score, but a history of successfully borrowing and repaying helps you get approved quickly.
- Income: Lenders need to verify that you have enough income to repay any loan you apply for. They may ask about your expenses and employment history, and they also look at your debt-to-income ratio, which compares your monthly income to other monthly debt payments.
Although lenders review your finances, these loans can be fast—in some cases, you can apply and receive funds on the same day. You often have one to five years to pay off personal loans, although other terms are available. That extended payment period helps keep monthly payments affordable (compared to loans that require payment in full within several weeks).
Online lenders are also worth a look as you compare lenders. In particular, if you don’t have a history of borrowing, you may benefit from lenders that use predictive analytics technology or alternative information—such as your education history and career path—to approve your loan. Although you handle everything remotely, the process can move surprisingly fast, and you may receive funds in your bank account within a few days.
Peer-to-peer (P2P) loans:
P2P lenders are a unique subset of online lenders offering personal loans. These online platforms enable you to borrow from other individuals instead of from traditional banks or institutional investors. People with extra money make their funds available to borrowers, and the P2P marketplace handles the logistics of connecting borrowers and lenders, reviewing your application, and processing payments.
Pros of Personal Loans
Potentially low interest rates
No collateral requirements
Repayment terms may be up to several years
Cons of Personal Loans
May take several days to receive funds
Approval may be difficult with no credit history or income
Payday Alternative Loans (PALs)
For small loans, some credit unions offer Payday Alternative Loans that are designed to prevent customers from using high-cost payday loans. Because federal rules limit application fees, and PALs have relatively low rates and a longer repayment period than payday loans, PALs may be easier on your finances than payday loans.
To use a PAL, you must be a member of a credit union for at least one month.
Pros of PALs
Available for smaller loans ($200 to $1,000)
Limited application fees
Relatively short debt payoff timeline (six months)
Cons of PALs
Maximum loan amount might not be enough
May still have double-digit APRs
Payday loan shops also provide small, fast loans, and they’re available at numerous retail locations. With a payday loan, you pay a fee to borrow, and you repay from your next paycheck. For example, you might pay $15 for every $100 you borrow, which might seem reasonable when you desperately need cash. However, for a short-term loan (14 days, for example), that amounts to an APR near 400%.
Pros of Payday Loans
Plentiful lenders in most areas
Provide cash quickly
Cons of Payday Loans
Cost more than other types of loans
Require you to pay off the entire amount within a few weeks
Auto Title Loans
Title loans let you get quick cash when you pledge your vehicle as collateral. To use these products, you need to have a paid-off car (or enough equity in your vehicle to cover the loan). To borrow, you temporarily transfer your ownership interest to the lender, who keeps it as security until you pay off your debt. As with payday loans, you pay off title loans quickly—often within 30 days or so—and these loans have similarly high costs. The Federal Trade Commission reports that charges can amount to an APR of more than 300%.
Be sure you can pay back the title loan if you take one out, though. If you fail to, the lender can repossess your vehicle, leaving you without transportation.
Pros of Title Loans
Numerous places to borrow
Provide cash quickly
Cons of Title Loans
Cost more than other forms of loans
Lenders can take your vehicle if you miss payments
Pawn Shop Loans
When you borrow from a pawn shop, you leave an item of value with the pawn shop and receive cash. If you repay the loan within a certain amount of time, the pawn shop returns your property to you. But if you don’t repay, the shop sells your item to the public. Pawn shops can provide cash for valuables, but losing sentimental objects like jewelry or musical instruments can be painful. Pawn loan fees can also add up: You may pay interest, storage fees, setup charges, and more.
Pros of Pawn Shop Loans
Give cash for valuables with no credit check
No effect on your credit if you can’t repay
Cons of Pawn Shop Loans
Fees can add to your total financing cost
Relatively high interest rates, depending where you live
Other Ways to Get Funds Quickly
Applying for a loan isn’t the only way to get money. You may be able to get what you need without the fees and interest charges above.
If your employer offers payroll advances, you may be able to receive cash from an upcoming paycheck. In many cases, you’ve already worked the hours, so paying you early poses no risk to your employer. Just remember that your next paycheck will be smaller.
If you have things you no longer need, you may be able to sell belongings and declutter at the same time. With Craigslist and other online resources, you may be able to find buyers and receive cash quickly.
Help from your friends:
Loans from friends and family may be able to help you get through a rough patch, but borrowing money (or even asking for it) might be territory you’d rather not venture into. Discuss everybody’s expectations in detail, and put a plan in writing before you take any money.
If you need help with food, utilities, and other basic needs, you might qualify for programs that ease your burden. Ask your utility company, or check with your local department of health and human services for ideas.
If you receive a significant bill, ask about payment options. Medical offices may be willing to give you several months (or more) to repay without additional interest charges. Even the IRS offers payment plans, but you may have to pay additional fees and interest if you delay tax payments.
Consumer Financial Protection Bureau. "What Are the Costs and Fees for a Payday Loan?" Accessed Sept. 30, 2019.
Federal Trade Commission. "Car Title Loans," Accessed Sept. 30, 2019.
Capital One. "Let’s Get Personal: Understanding How to Get a Personal Loan," Accessed Sept. 30, 2019.
MyCreditUnion.gov. "Alternatives to Payday Loans," Accessed Sept. 30, 2019.
National Credit Union Administration. "Payday Alternative Loans," Accessed Sept. 30, 2019.
MyCreditUnion.gov. "Payday Loans," Accessed Sept. 30, 2019.
National Pawnbrokers Association. "Pawn Industry Statistics," Accessed Sept. 30, 2019.
Georgia Department of Banking and Finance. "Pawnshops / Title Pawn," Accessed Sept. 30, 2019.