More than half (63%) of Americans have $400 in cash or savings to cover a financial emergency, according to a recent Federal Reserve survey. Without that safety net, your budget could be strained when unexpected emergencies happen, such as a surprise dental bill or an urgent plumber’s visit. Same-day loans can help cover these urgent expenses.
Same-day loan lenders can provide money in a hurry, but the loans can be risky and costly. It’s important to understand how same-day loans work, as well as their pros and cons and alternatives.
- Same-day loans are not one specific type of loan, but simply a loan that approves your funds within 24 hours.
- Same-day personal loans can provide up to $100,000, with funds often deposited within hours of approval.
- Personal loans, cash advances and payday alternative loans are all same-day loans, depending on the approval process.
- Payday loans are usually the most expensive same-day loans, often with predatory terms that include APRs of up to 400%.
What Are Same-Day Loans?
A same-day loan, sometimes called an emergency loan, is any loan that promises to fund your account within a day. To deposit loan funds quickly, many lenders use automated underwriting, so the approval process can take just minutes rather than days.
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How Do Same-Day Loans Work?
Some loans marketed as “same day” may not actually reach your bank account the day you apply. Often, even “fast funding” can take between 1 and 3 business days.
Always ask in advance how quickly approval will be granted and how long it will take for the funds to be deposited. The fastest option is rarely the cheapest. If you can wait a couple of days, you’ll pay less in interest.
Here’s the general application process for a same-day loan:
- Find a lender that offers same-day loans.
- Provide proof of your age using a government-issued ID, contact information and an active bank account that allows direct deposit for the loan funds.
- Submit an application, usually online.
- Wait for the lender to review your employment status and income. Some lenders will run a hard credit check (for personal loans), while some, like paycheck advance apps and payday loan providers, will not.
- Watch for the funds (if approved), usually by direct deposit to your bank account.
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Types Of Same-Day Loans
There are a few ways to get cash within a day, but turnaround time and overall cost vary by type. Here’s a breakdown of potential speed and cost.
Same-Day Personal Loans
Personal loans are a common type of same-day loan, and you can apply for them with an online lender, bank or credit union. The amount you can borrow will depend on your income and credit profile.
Personal loans usually have fixed interest rates and a monthly repayment schedule. In some cases, a same-day loan may have shorter terms, but not always.
The rate you receive on a personal loan will depend on the lender’s personal loan requirements for credit score and income. Overall, personal loans are usually a safer choice for same-day loan funding than, say, payday loans.
Payday Alternative Loans
You’ll have to be a member in good standing, but many credit unions offer their members payday alternative loans (PALs). These loans can provide fast funding, but you should ask in advance how long it takes for a deposit to clear. There are two types of PAL: one offering up to $1,000, and another that allows you to borrow up to $2,000.
The interest rate on a PAL loan is capped at 28%, the maximum interest rate credit unions are allowed to charge by law, making it a less expensive option if you have fair credit.
Online Installment Loans for Bad Credit
If you have poor credit and can’t qualify for a traditional personal loan, online installment loans like these can be a way to get your hands on money quickly.
Funds are often disbursed the same day or the next, but you’ll pay higher APRs, though some lenders cap rates at 36%.
Credit Card Cash Advances
Many credit cards include a cash advance feature, allowing you to withdraw funds against your available line of credit. The process is usually instant; the funds are deposited into your bank account as soon as you convert the credit into cash.
It’s not cheap. Most credit card issuers charge a flat fee and a percentage of the amount you borrowed. And the interest rate on a cash advance is often higher than the one applied to regular purchases. Interest also starts accruing the minute you take out the cash advance.
There are risks to your credit by using this path, including a hit to your credit score if you can’t repay the advance. A cash advance will also increase your total credit utilization ratio.
Payday Loans
Payday loans are short-term loans offered by same-day loan lenders called payday lenders, either through storefronts or online, that often target consumers with low credit who need to borrow money to tide them over until payday. These loans often have two-week repayment terms and exceptionally high interest.
The Consumer Financial Protection Bureau (CFPB) warns against this financing because some payday lenders charge predatory interest rates on loans. For example, a two-week payday loan with a $15 fee on each $100 you borrow equals a 400% APR.
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When A Same-Day Loan Makes Sense Or Not
A same-day loan can be the right call when you’re facing a serious emergency, like a utility shutoff today, groceries to feed your family, an essential car repair to get to work or a late payment that will trigger an eviction.
However, using same-day loans for noncritical spending, such as a vacation or the latest tech gadget, is not usually recommended.
If you can, wait 24 to 48 hours to hunt for a less-expensive option. While a late bill may trigger a fee or borrowing cash from a friend might feel awkward, these options may be less expensive than using a same-day loan with an inflated APR.
The True Cost Of Same-Day Loans
The true cost of a same-day loan will depend on the interest rates and fees. For example:
- A 6-month personal loan at 12% APR costs about $18 in total interest on a $500 loan.
- A credit card cash advance at 25% APR costs about $10 in interest if repaid in one month, plus a $15 – $25 transaction fee on a $500 loan.
- A credit union PAL at 28% APR (the maximum credit unions are allowed to charge) costs about $42 in total interest on $500 over 6 months.
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How To Find A Same-Day Loan Lender And Apply
You’ll need to provide proof of income, an active account for the deposit and a valid government-issued ID. To speed up approval and funding:
- Apply early in the day for the best results, in case there’s a deadline for same-day funding.
- Ask the lender how long it takes to receive the money once approved. “Same-day” doesn’t always mean that; be prepared.
- Have your ID, along with recent pay stubs and bank statements, on hand before you start the application.
- Be prepared to pay a fee in exchange for speed.
- Once you find a suitable lender, always double-check your application. Why? Because an error can trigger a manual review, which will lengthen the approval period.
Same Day Loans: Red Flags To Pay Attention To
Unfortunately, there are many predatory lenders in the same-day loan space, so watch for red flags when shopping around. Here are some common warning signs:
- “No credit check” guarantees. Reputable lenders verify your ability to repay, and no-credit-check loans almost always come with triple-digit APRs.
- Upfront fees before funding. If a lender asks you to pay for anything up front, be wary. Legitimate lenders usually deduct their fees from the loan amount they approve.
- High-pressure tactics. Urgency is designed to push you past careful review.
- Unclear total repayment amounts. If you can’t easily find the total cost, including fees, avoid the loan trap at all costs.
Same-Day Loan Alternatives
If you don’t want (or don’t qualify for) a same-day loan, there are alternative steps you can take if you’re in a financial emergency:
- Call your service provider or creditor and ask for a payment plan for what you owe.
- Use earned wage access or cash-loan apps to access funds from your next paycheck for a fee. Use with caution; they may have high fees and other risks.
- Ask your HR department at work about the potential for a paycheck advance ahead of your normal pay date.
- Reach out to local community programs that may be able to help with emergency expenses for food, utilities and housing.
- Ask a family member or close friend for a loan (but proceed with caution and clear conditions).
How To Choose A Same-Day Loan
Before you choose a same-day loan, ask yourself:
- What am I using the funds for?
- How much do I need to borrow?
- How much can I afford to pay back?
- What is the total cost of the loan?
Use an online calculator before obtaining a loan to calculate the full repayment amount, including interest and fees, to make sure you can afford it. If you can’t, consider alternatives or borrow a smaller amount.
FAQ
The Bottom Line: Choose A Same-Day Loan With Caution
Same-day loans can help you get cash fast to cover an unexpected emergency. These loans can deliver funds within minutes, hours or within a day, depending on the lender. But speed has a price.
Compare each option’s APR and fees, and make sure to understand the total repayment cost, what you’ll pay monthly, and how fast you can get the funds to avoid overpaying or getting into deeper debt.
If you’re looking for same-day financing, explore personal loan options.
Maya Dollarhide
Maya Dollarhide is a freelance writer with over a decade of experience covering personal finance topics. Her writing credits include AARP, Bankrate, Investopedia, CNN.com, Yahoo Finance and Lending Tree. She enjoys writing articles and producing multimedia content that helps individuals and families make informed decisions about their money, from mortgages and home loans to reducing credit card debt and saving for retirement. She has also created educational materials for use in schools to teach young people about personal finance, from opening up a bank account to saving for college and beyond.
