Advantages and Disadvantages of Loan Apps

Advantages

You can quickly obtain money. Sullivan mentioned that it typically takes two to three days for most conventional lenders to approve a loan. “If you are in a rush – and most individuals seeking loan applications are in a rush – you can likely discover a solution that offers same-day cash.”

Apps are user-friendly. To begin, just download the app and fill in basic details along with your bank account login credentials. Vincent Birardi, a certified financial planner and wealth advisor at Halbert Hargrove, mentioned that it typically requires 10 to 15 minutes, which can be seen as both advantageous and disadvantageous.

Your identity will remain anonymous. Having not properly planned, individuals may feel embarrassed when they need to request money from a bank or a person personally due to a lack of funds. “Sullivan mentioned that there are individuals who just refuse to meet in person.”

You have the option to compare prices from different stores. When you utilize online applications for borrowing, you have the opportunity to examine different offers, which Sullivan recommends individuals should capitalize on to discover the best terms available.

Disadvantages

The price is typically expensive. Numerous loan applications appear to offer various methods for extracting money from you, such as optional tips and donations. “Sullivan stated that interest rates are frequently between 150% and 300%.”

You must allow access to your bank account. “Birardi stated that you must feel at ease disclosing personal financial information to one of these apps”. He suggested initiating a direct dialogue with customer service initially to gain a sense of confidence in the legitimacy of the lender.

The usual loan amount is small. Loan applications typically limit the maximum loan amount to a few hundred dollars. If you require larger sums of money, you should consider applying for a personal loan.

The windows for repayment periods are brief. Typically, the loan applications will deduct the repayment directly from your bank account on your upcoming payday or in a few weeks.

The Best Apps to Borrow Money in USA

With dozens of loan apps available online, it can be tough to navigate which one is best for you. To help get you started, here’s a look at the best apps to borrow money in USA.

• Chime.
• Dave.
• Brigit.
• Albert.
• EarnIn.
• MoneyLion.
• Possible Finance.

Chime: Best For No-Fee Cash Access

Chime is an internet-based banking application that allows you to withdraw money, even if your balance is low, as long as you have a checking account linked to direct deposit. It provides a no-fee overdraft feature (as opposed to a loan) called SpotMe, allowing you to withdraw up to $200 beyond your balance reaching zero. Chime will retrieve the borrowed amount without charging interest or fees when payday arrives. Chime allows you to access your salary two days before your direct deposit is received.

Dave: Best For Larger Amounts

Dave’s ExtraCash feature allows users to receive cash advances of up to $500 directly onto their Dave Debit Mastercard. Not everyone will meet the qualifications for that limit immediately, but there will be no late fees no matter how much you borrow.

Brigit: Best For No Late Fees

Using Brigit’s Express Delivery, you can receive up to $250 within minutes for a small fee, but there is no cost if you choose to wait two to three business days. You have the option to ask for a payment extension and select the repayment date without incurring any additional charges. Brigit provides a credit-building program as well.

Albert: Best For a Variety of Financial Tools

Albert is an additional loan application that offers the choice to receive a quick cash advance for a small charge, or no charge if you are willing to wait two to three days. The maximum amount that can be borrowed is $250. It also provides additional functions to assist in saving and investing, like budgeting and investment tools.

EarnIn: Best For Multiple Advances in a Pay Period

EarnIn allows you to receive a maximum advance of $750 every pay period, with a daily limit of $100.

MoneyLion: Best For Deferred Payment Option

MoneyLion provides cash advances up to $500 without charging any interest or monthly subscription fee. Having a paid Credit Builder membership, priced at $19.99 monthly, increases your Instacash limit to a maximum of $700. By changing your direct deposit to a MoneyLion account, you can gain access to as much as $1,000. If you don’t have enough money by the time payday comes, you can ask for a two-week extension on your repayment.

Possible Finance: Best For Longer Repayment

Possible Finance is like a blend of a loan application and a personal loan, as the repayment terms can extend up to 12 months. You have the option to immediately borrow a maximum of $500 with no additional late charges. From that point onward, your payments are automatically processed through direct deposit from your bank account. Nevertheless, there is a 29-day grace period available to you.

Alternatives to Loan Apps

Using loan apps may not always be the most suitable option when you require funds. Birardi stated that the most suitable option other than borrowing is establishing an emergency savings fund with three to six months’ worth of average monthly expenses. That should eliminate the necessity of utilizing the cash advance application.

Meanwhile, here are a few alternative choices to contemplate:

Credit card with 0% annual percentage rate. Having good credit may make you eligible for a credit card with no interest on purchases for a period of 12 months or longer. To quickly access funds, search for cards that offer immediate use.

Seeking advice from relatives or intimate friends. If it won’t put your relationship at risk, you could consider asking a family member or friend to lend you some money until you get paid. In this manner, you can avoid paying fees, interest, or disclosing banking information.

Protection against overdrawing your account. Many banks and credit unions, as well as apps such as Chime, provide options for exceeding your account balance. Sullivan suggested that if you’re broke and need to go to work with a flat tire, using this option, especially without any fees from your bank, might be better. “It prevents you from entering the cycle of taking out loans or cash advances.”

Loans for individuals. If your credit score is high enough to meet the requirements for a reasonable interest rate, consider borrowing a slightly larger amount with an extended repayment term to provide some flexibility for yourself. Sullivan mentioned that borrowing more might result in lower overall costs, taking into account the APR and additional fees.

Conclusion

Some loan applications are convenient and provide access to money without high expenses for you. With that being said, you should strive to prevent yourself from needing to depend on such services. Choosing a loan app with good terms means you will still struggle to catch up when it’s time to repay, leading to a decrease in income.

Frequently Asked Questions