If you’re in a financial bind and have minimal savings, you’ll likely have to resort to a loan to get the funds needed to meet your financial needs. But if your credit score is on the lower end, securing a personal loan from a bank or credit union could be challenging.
Some consumers turn to debit card loans instead to get fast cash without jumping through several hurdles. Before you resort to this type of financing, it’s vital to understand how it works, along with the potential benefits and drawbacks. You may find that an alternative funding source is more viable for your financial situation.
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Can You Get a Loan Using Your Debit Card?
Yes, debit card loans are short-term loans readily available to financially distressed consumers. They’re generally deposited into your checking account or onto your debit card and payable within a set period. You should also know that the funds are automatically withdrawn from your debit card on the payment due date to ensure the lender receives timely payment.
Types of Loans You Can Typically Get on Your Debit Card
There are four popular debit card loans you should be aware of.
Instant Cash Loans
When you’re approved for an instant cash loan, the loan proceeds are typically deposited into your bank account within 24 hours. However, these loans are unsecured, and you may have to undergo a credit check when you apply.
Payday Loans
Payday loan proceeds are generally deposited onto your debit card and accessible right away. Consequently, you won’t have to wait for the funds to clear your bank to start making purchases or covering expenses.
Personal Loans
Personal loans come with extended terms – typically one to two years – which means you’ll have more time to repay what you owe. In addition, you’ll typically remit payments in monthly installments. Still, you’ll likely pay far more in interest since the lender has more time to collect interest from you.
Cash Advances
If you have access to a credit card that offers cash advances, you can withdraw funds from an ATM or at any physical bank branch and deposit it into the bank account tied to your debit card (assuming you have available credit). The funds should be available for use right away. However, be mindful that credit card cash advances come with fees, and you’ll likely pay a higher interest rate on the amount you withdraw.
Advantages of These Types of Loans to Debit Card
Debit card loans come with some key benefits:
Easy Application
You can apply online in most instances using your laptop, desktop or mobile phone relatively quickly and receive a quick lending decision.
Instant Funding
Many lenders deposit funds to your debit card in real-time or to your checking account within 24 hours.
Offered by Many Lenders
There’s no shortage of lenders offering debit card loans. Still, you want to do your research by comparing lenders and analyzing fee schedules before making a selection.
The Credit Pros will help improve your credit score by removing inaccurate credit information from your consumer credit reports.
Check your credit report and FICO credit score, understand, manage, and improve your credit and protect your personal information.
You’re more than just your credit score. With Grain, it’s possible to access a revolving line of credit based solely on your cash flow.
Direct Deposit to Your Debit Card
If funds are deposited to your debit card, you can skip the processing delays at the bank. This means you can get back on track financially much sooner.
Does Not Require Good Credit
A poor credit score doesn’t automatically mean you’ll be turned down for funding. In fact, you may be able to apply for a debit card loan with no credit check, which means your credit rating won’t impact the decision process or financing terms you’re offered.
Disadvantages of These Types of Loans to Debit Card
Unfortunately, there are also drawbacks to debit card loans to keep in mind:
Fees and High Interest
Since debit card loans cater to borrowers with past credit challenges, they come with hefty fees and interest rates to minimize the risk posed to the lender. The upside is you can view the fee schedule before accepting a loan offer to avoid any surprises.
Short Repayment Terms
Unless you’re taking out a personal loan, payment for the amount you borrow is usually due by your next payday. This means you’ll only have two to four weeks to come up with the funds needed to repay the lender to avoid incurring penalties and additional interest.
Deceitful and Predatory Lenders
Not all payday lenders are the same. Some are fraudsters who charge exorbitant fees and prey on innocent consumers who are desperate for cash and trying their best to get back on track financially. But you can protect yourself by researching the lender to determine if they’re legitimate. Search online for reviews from past and current borrowers, and refer to the Better Business Bureau’s website to confirm they’re accredited with a good rating.
Risk of Scams and Fraud
There are payday lending sites on the web that exist solely to scam people out of their hard-earned cash. Before applying for a loan, always confirm the site is secure and that you’re dealing with a real lender that’s licensed to do business in your respective state.
