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Same-Day Loans: What They Are And How They Work

11-Minute Read
Published on January 3, 2024
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Being strapped for cash can put you in a tight spot, creating desperation and stress. When you can’t afford basic expenses or upcoming bills, same-day loans can seem like a good choice, especially when lenders advertise instant funding without a credit check. However, same-day loans charge interest rates as high as 400% and often require repayment within days of borrowing.

These factors put borrowers in a trap as they borrow more to cover the original debt, and the balance due grows to thousands of dollars for what was initially a few hundred dollars.

What Are Same-Day Loans?

A same-day loan allows the borrower to receive funds on the same day they apply for the loan. Also called an emergency loan, this form of debt provides quick access to cash for borrowers facing urgent financial needs or unexpected expenses. The loan application, approval and disbursement all occur within a day. However, the speed at which you receive the money comes with excessive fees and interest rates – drastically higher than other loan types.

The immediate assistance same-day loans offer has the downside of higher interest rates. As a result, borrowers usually see them as a last resort, with other loans (such as personal loans) being more affordable options. That being said, same-day loans are unmatched in their ability to help in a pinch.

How Do Same-Day Loans Work?

Same-day loans work the way they sound: You can receive the loan funds the same day you apply. Same-day loans typically have higher interest rates and fees than traditional loans, which can vary by lender.

Borrowers can get a same-day loan by applying with a lender and receiving the funds. Applying involves providing the necessary bank account information, personal identification and collateral (a vehicle, piece of jewelry, etc.), if necessary. Credit checks aren’t part of the approval; instead, the lender charges higher interest to cover their risks, expediting the process.

The funds you receive from a same-day loan can be used for anything. Borrowers often use them for the following financial needs:

  • Medical bills 
  • Funeral or burial expenses
  • Urgent home repairs
  • Unexpected car repairs
  • Emergency veterinary care
  • Unexpected travel
  • Rent and mortgage payments
  • Utilities

How To Apply For Same-Day Loans

Applying for a same-day loan takes a fraction of the time conventional loans require. Here are the steps to take if you want a same-day loan:

  1. Calculate how much you need: Assess your financial needs and determine the exact amount you require. Consider your expenses and the purpose of the loan. Because the interest rates of same-day loans are among the highest in the lending industry, minimizing the amount you need will make borrowing less expensive.
  2. Compare loans and pick a lender: Research different lenders online or in your local area for offers. Remember, same-day loans don’t require credit checks, so fielding numerous offers won’t ding your credit. Comparing the interest rates, fees, and repayment terms will help you get the deal that best fits your situation. For example, you might shoot for the lowest interest rate or the longest repayment period, depending on your needs.
  3. Collect necessary documents: Borrowers seeking same-day loans usually submit less documentation than for other loan types. However, some documents are still necessary, and preparing ahead of time will streamline the application. You'll provide identification (like a driver's license), a blank check and collateral documents (such as a car title). You might also have to provide your address and proof of income.
  4. Calculate your payments: The affordability of your loan is crucial to understand. Otherwise, your debt can spiral into an unmanageable weight on your finances. Calculate the resultant payment to ensure the same-day loan will not ultimately worsen your financial situation. An online loan calculator can help you estimate your monthly payments. Consider the total cost of the loan, including interest and fees, to verify it fits within your budget.
  5. Consider any other options: Same day loans can be dangerous and are not recommended. Before you apply, research any other options you may have.
  6. Apply: Visit the lender's website or a physical branch to start the application process. Be sure to fill out the application form with accurate and complete information, provide the necessary documents, and double-check the application for the interest rate you expected. You can expect to receive the loan on the same day. Remember, borrowers usually need an active bank account to receive it.

The steps above outline the process, but the specific requirements to qualify for a loan may vary by lender. If receiving a loan at top speed is your priority, it’s recommended to prequalify for the loan if possible and research the lender’s requirements beforehand. Doing so will smooth out the road ahead and help you receive the loan on the same day.

At A Glance: Advantages and Disadvantages of Same-Day Loans

Pros

Cons

Immediate or almost immediate loan approval and disbursement

Shorter loan terms may make it harder to pay over time

Simple, fast application process

Typically higher processing fees, interest rates and APR

Low credit requirements and sometimes none at all

Increased risk of falling into a debt cycle

Customizable loan sizes ranging from a few hundred to several thousand dollars

Can require collateral, such as a vehicle or family heirloom

May be available through the institution you bank with

No positive effect on credit for on-time payments and credit mix, like other loans

Pros

Same-day loans benefit the borrower because of their quick approval and disbursement processes. Online lenders, in particular, use streamlined systems that allow you to complete the application from the comfort of your home and receive rapid approval. The lender transfers the funds to you promptly, providing quick access to the needed cash.

In addition, while traditional lenders impose credit requirements, some same-day loan providers consider other factors, including income and collateral. Borrowers can also choose the loan size based on their specific needs, ranging from a few hundred to several thousand dollars. This customization allows individuals to borrow only the amount necessary, avoiding unnecessary debt. Lastly, the bank you already use for your financial transactions may offer same-day loans, adding more convenience and familiarity to the process.

Cons

Same-day loans often come with shorter repayment periods, typically ranging from 2 weeks to a few months. While this short-term structure can benefit borrowers who settle debts quickly, it may pose a challenge for borrowers dealing with larger loan amounts. The convenience of rapid access to funds comes at a premium, with the annual percentage rate (APR) for these loans often significantly exceeding that of other credit options. For instance, a payday loan of $500 can have interest rates as high as 400%.

As a result, the combination of short repayment terms and elevated costs raises the risk of borrowers falling into a debt cycle. In other words, the compressed timeframe and astronomical interest rates result in higher balances due to the point of utter unaffordability. Struggling to meet the repayment obligations within the brief repayment period may prompt borrowers to roll over the loan or take out a new one, creating an endless loop of borrowing to cover previous loans. Plus, same-day loans requiring collateral can result in the loss of your possessions.

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Types Of Same-Day Funding Loans

Same-day loan rates, terms and requirements differ by lender and loan type. Here are some of the most common types of same-day loans you'll encounter in your search.

Installment Loans

An installment loan is a personal loan you receive on the same day you apply. It comes in a lump sum you’ll pay back in monthly installments over several months or a few years. Installment loans offer higher loan limits than payday or title loans. In addition, borrowers don't have to put up collateral. However, this loan type often requires a credit check. The good news is your credit score can qualify you for a lower interest rate.

Same-day personal loans can provide immediate funds with less risk of falling into a debt cycle than other same-day loans. Not all lenders offer same-day loans, so you may have to shop around.

Payday Loans

Payday loans usually provide between $500 and $1,000 to hold you over until your next paycheck. The loan amount is due in full when you get paid, hence the name. As a result, most borrowers have 2 weeks to come up with the money for the loan, interest and fees. Approval and disbursal typically happen within the same business day, and a lender may request access to your bank account via a blank check or account details to guarantee repayment.

Most payday lenders don’t require a credit check, making these loans appealing to borrowers in financial straits. However, the lending fees and APR are steep. A lender typically charges $10 – $30 per every $100 borrowed, translating to an APR of about 400%. For instance, you might pay $520 in 2 weeks to borrow $400 today. Lenders may allow you to roll the loan over for another 2 weeks if you can’t repay it in time, but each rollover incurs another lending fee.

Title Loans 

Title loans are like payday loans in that they often don’t require a credit check and are disbursed the same day they’re approved. However, they require some form of collateral – usually the title to your vehicle – to secure the loan.

Financing fees are typically 25% per month, resulting in an APR of 300%. Repayment typically happens over a 15 – 30-day period, and lenders may offer rollover options. If you default on a title loan, the lender can take your vehicle. Losing your transportation could result in a job loss if you can’t get to work, making your financial situation even more dire.

Cash Advance From A Credit Card

You can skip the application and credit check process by using your credit card for a cash advance. Doing so allows you to withdraw cash from a bank, credit union, or ATM and put the balance on your credit card.

Card issuers charge higher interest rates for cash advances than regular card purchases, and interest begins accruing immediately upon withdrawal. There’s also an upfront fee of 3% – 5% of your withdrawal amount.

Pawn Shop Loans

Borrowers with valuable collateral can offer it to a pawn shop in exchange for a loan. The shop holds the item until the borrower repays the loan. If the borrower defaults, the shop can resell the item in the store to recoup the loan cost. Like title loans, there's no credit check, and you risk losing your collateral if you can't afford the loan. APR on these loans can be over 200% but it depends on the lender, and repayment terms may vary between pawn shops.

Alternatives To A Same-Day Loan 

Fortunately, same-day loans are just one of many forms of accessible debt. The following alternatives can provide the needed funding with lower fees and interest rates.  

HELOC 

A home equity line of credit (HELOC) is a source of credit based on your home equity. You can borrow against your home's current market value if you have 15% – 20% or more equity in your home. The borrowing period lasts several years; then, the borrower will owe monthly installments on the loan amount plus interest. HELOCs offer lower interest rates than same-day loans, and the borrower has years to repay the balance due gradually. The drawback is that you use your home as collateral, meaning you could lose your home if you default. It also takes longer than a day to be approved.

Home Equity Loan

A home equity loan is another way borrowers can leverage their equity. While HELOCs let you borrow money over time, you receive the funds of a home equity loan all at once. You'll get a lump sum with a fixed interest rate and a predetermined repayment period. These terms are less stringent than you would receive from a same-day loan, making home equity loans less expensive and stressful. Like a HELOC, this option creates a second mortgage, and default could mean losing your home. It also takes much longer than a day to get one.

0% APR Credit Card

Some credit card companies offer a promotional period of 0% APR for customers opening new cards. The introductory period typically lasts 12 – 18 months, meaning you won't owe interest on the balance for that span of time. This option is advisable if you're confident you can repay your full balance within the promotional period. On the other hand, failing to do so will result in APRs of 20% or higher on the balance.

Personal Loan

Personal loans are installment loans available through traditional banks, credit unions, and online lenders. These loans usually require borrowers to pass a credit check and meet debt-to-income ratio limits. However, they don't require collateral (although providing it can lower your interest rate or help you obtain a personal loan if you have suboptimal credit). Borrowers can receive these loans within a week or less after applying. The lower interest rates and longer repayment terms make them suitable alternatives to same-day loans.

A Friend Or Family Member

Asking family or friends for money instead of taking out a same-day loan is an option that doesn't involve a lender. As a result, doing so can help you avoid interest rates and fees. It can also provide more time to repay what you borrow.

However, getting into debt with a loved one can be fraught with complications. It's crucial to spell out the repayment terms when you borrow the money and adhere to the agreed-upon plan. Remember, failure to repay could lead to tension or conflicts.

Same-Day Loan FAQs

The answers to these frequently asked questions can help you determine if a same-day loan is the best way forward.

Are same-day loans worth it?

Same-day loans usually incur interest rates between 200% and 400%, making them one of the most expensive forms of debt. Because they provide funding within hours of applying and don’t require a credit check, the convenience can give essential help if you’re in a pinch. However, other loan types can provide funding almost as quickly and give borrowers lower interest rates and longer repayment terms.

Where can I get a same-day loan?

You can get a same-day loan from payday lenders, title lenders, pawn shops, banks and credit unions. Borrowers can apply in person or online for rapid approval and same-day funding. Additionally, cash advances are available at most ATMs.

Can I get a same-day loan without a credit check?

Yes, most same-day loan options typically don’t require a credit check as part of their approval process. Pawn shops and title lenders require collateral to cover their risk, while payday lenders and credit card companies charge higher interest rates for not imposing a credit check.

Do same-day loans hurt my credit?

Same-day loans usually don’t require a credit check, meaning your credit won’t drop when you apply. On the other hand, failing to pay the loan can damage your credit in specific circumstances. For instance, pawn shops and title lenders usually don’t report to the major credit bureaus because they recover losses by keeping your collateral. However, payday loan balances can go to collection agencies, which report to the credit bureaus, and cash advances create a balance on your credit card, which impacts your credit. 

Are same-day loans better than using a credit card?

Same-day loans are usually worse than credit cards because the APR ranges from 200% – 400%, plus fees. Conversely, credit cards typically have interest rates of 20% – 25% and give you a month to pay the balance before interest starts accruing.

Getting A Personal Loan Has Never Been Easier.

The Rocket LoansSM application process makes borrowing simple.

Apply Now

The Bottom Line

While same-day loans provide immediate financial assistance and can be convenient in urgent situations, they have sky-high interest rates and fees. Because of the heavy expenses and short repayment periods, same-day loans have more potential to create a debt cycle for borrowers.

Exploring alternatives such as installment loans, home equity options, 0% APR credit cards or personal loans from traditional lenders can offer more affordable terms. Lenders offering these tools provide lower interest rates and more time to repay the balance. You can see how much you qualify for with a personal loan from Rocket LoansSM.

Headshot Ashley Kilroy

Ashley Kilroy

Ashley Kilroy is an experienced financial writer. In addition to being a contributing writer at Rocket Homes, she writes for solo entrepreneurs as well as for Fortune 500 companies. Ashley is a finance graduate of the University of Cincinnati. When she isn’t helping people understand their finances, you may find Ashley cage diving with great whites or on safari in South Africa.