Online Title Loans: Why You Probably Shouldn’t Risk It

Online title loans are an easy and fast way to get cash, but the risks involved make these loans more trouble than they are worth. Debt grows quickly and defaulting on your loan most likely means losing your only mode of transit. 

Title loans, sometimes referred to as car title loans, both online and from traditional stores, have long been the focus of regulatory action due to the cycle of debt these loans can cause. We strongly recommend using these loans only as a last resort.

How do online car title loans work?

Online car title loans are loans taken out using your motor vehicle as collateral. These loans are usually expected to be repaid within a month, with many lenders offering to extend this period by renewing or “rolling over” the loan. The renewals often come with high fees or interest rates adding on more debt to the original agreement.

Along with the risks to your credit, car title loans can put your access to your workplace, school, or home at risk (due to using your car as collateral). Due to the risky nature of these loans, title loans are highly regulated or outright banned in nineteen states, not unlike payday loans and short-term loans.

A loan from Possible may be the friendliest option for you. Borrow up to $500 in minutes, repay the loan in multiple installments, and build credit history.

How do I qualify?

Title loans are often marketed to those with poor or little credit history, similar to bad credit loans. Title lenders tend not to check credit or accept very poor credit. The biggest factor when applying for a title loan, is the market value of your vehicle. 

Lenders are only able to accept vehicles that are fully paid-off and are titled in your name. The loan amount you’re approved for and that you borrow is based on the market value of your car. Depending on the make, mileage and year of your vehicle, lenders usually value your car far below the market rate, extending maximum loan amounts of a few hundred to a couple thousand dollars.

What happens if I can’t pay?

Many lenders will continue to “roll-over” your loan amount. While this will give your more time to repay, your lender can claim your vehicle at any time after the term of your loan. This process can lead to a cycle of charges with roll-over fees deepening your debt. If you can, at least make a partial payment on your loan.

If you’re unable to repay your loan and the lender declines to extend your payment time, your vehicle (collateral) will be repossessed. Most lending companies will hire a third-party repossession agency to find and tow your vehicle. Repossession agents can take your car at any hour of the day without notice or warning. You may wake-up one morning or clock out of work only to find your vehicle gone.

In contrast, if you default on a payday loan, short-term loan, or a Possible loan, no collateral will be seized. These are unsecured loans so only your credit profile may be negatively impacted.

Title Loan Process

Hunt down information about your vehicle

Whether you are applying for a title loan online or in a brick and mortar store, you will need to know the make, model, year, and mileage of your car. Depending on the lender, you may need proof that your vehicle is lien-free and fully paid-off. In other words, you must have a lien-free title and you should bring your certificate of title.

As with any other loan application, you will need to have your personal (such as your driver’s license) and banking information ready. When applying online, always make sure you are applying to a known and verified service.

Apply though your lender

Each lender will have their own process for applying. Some allow you to apply completely online while others will require an application over the phone after you have submitted your information through their website. Some type of online form or online request is common.

Receive your cash funds

The only real advantage of title loans is the speed at which you can receive your loan. Online title lenders will often send your funds directly to your bank checking account or debit card the same day, while brick and mortar stores are quick to pay in cash during your first visit.

What are the risks and benefits of an online title loan?

Benefits

Fast cash without credit

Like many other payday and short-term loans, title loans are intended to be used for small financial gaps, unexpected expenses, or cash emergencies. With this is mind, lenders try to make the application process as quick and easy as possible and require no credit check. Applications are usually processed the same day, with your funds arriving within 1-2 days.

You can continue using your car (sort-of)

Lenders are only really interested in selling your car if your loan remains unpaid, so you will be able to use your car even while your loan is open. Be careful though. While lenders may not be quick to repossess your car, the threat of repossession can cause immense pressure to repay or renew with added fees.

Risks

You may lose more than your car

Borrowing funds against your car can be much riskier than it seems. A 2016 report by the Consumer Financial Protection Bureau shows one in five borrowers have their vehicles repossessed by their title lender. Unless you live in a city with reliable mass-transit, you most likely rely on your vehicle to commute to work, shop for groceries, and for general transit. If losing your vehicle means losing your ability to earn income, buy food, or seek medical treatment, defaulting on a title loan can lead to catastrophic financial trouble.

While repaying your loan, you may still be able to drive your car, but only at your lender’s discretion. Some brick and mortar-lenders will install tracking systems or ignition impairment devices to give your lender easy access to your vehicle should you default on your loan. Some lenders use these ignition devices as a “reminder system”, preventing you from starting your car until you’ve made a payment. Under these systems, you’re paying for access to your own vehicle. You will need to call your lender at their telephone number just to use your vehicle.

High interest, Short term, Bad deal

It’s easy to think of a title loan as borrowing against yourself. Your car has “value” and your loan simply gives you access to this value in the form of cash. While this description is accurate, it’s not quite correct. 

In the current market for title loans, lenders will only extend borrowers somewhere between 25% to 40% of what your vehicle is worth. If you’re really lucky, you may find a lender willing to extend up to 50% of your car’s value. 

What makes this a bad deal? Title lenders value your car based on its market value. If your car is worth $12,000 used, you may only be lent $5,000. Not only are you responsible for repaying this $5,000 back with fees, the remaining value of your car is forfeit should you default on your loan. 

Who are you really talking to?

Online title loan lenders have become much more common as many payday, cash advance and short-term loan lenders have migrated some services out of brick and mortar stores. As with any business online, there are inherent risks.

It can be difficult to know exactly who you borrow money from. Terms, agreements, and fees can be hidden on pages that are difficult to find. Your personal and financial information can be compromised, either by your loan lender or simply a lack of security measures in their system.

A Cycle of Debt

Rolling over your loan can trigger an avalanche

While title loans may only seem dangerous to those who miss payments, A recent report by the CFPB shows this cycle is more of the “rule” than the exception when it comes to Title loans. According to the CFPB Only 12% of lenders pay off their loans without “renewing” their loan. 

Title loans are marketed as single payment loans, however, 80% of title loans are renewed by borrowers on their due date. These fees quickly add up turning what was originally a one-time emergency loan into long term and unaffordable loan. One third of lenders renew their loans more than 7 times! These customers make up over two thirds of the entire title loan customer base, trapped and paying ever-growing fees.

Regulations around these loans

Payday and title loans have been the target of recent regulation in many states. Title loans are outright banned in Colorado, Connecticut and Hawaii, among others, and the Arizona State legislature is moving forward with an initiative to ban title lending in 2020.

Other states have sought to more strongly regulate these title loans through interest caps and fee limits. In certain states, regulators require title lends to pay you, the borrower the difference of your loan and the sale price of your car if the loan is defaulted on.

Consider all other options

Personal loans

Reach out to your bank, local credit union, or other lending services. Personal loans are more difficult to qualify for than payday or title loans and may have a longer application, but the interest rate and fees are extremely low when compared to other short term option. Usually, you’ll repay the loan in monthly payments.

Credit card cash advances

Cash advances through your credit card are an expensive way to have cash in hand, but are a good option before turning to Title loans. Most card vendors will charge a flat rate or percentage based on the cash amount you are withdrawing.

Installment loans

Installment loans can be a solid option for cash if your credit is lacking. These loans are highly structured, breaking your payments down into easier to manage installments. Since installment loan amounts are fixed, you avoid the risk of falling into a cycle of debt. A Possible loan is a type of installment loan where you can get up to $500 in minutes and build credit history – much better at improving long-term financial health.

Payday alternative loans

Many community banks, credit unions, and other financial institutions offer short-term lending options at extremely low rates. Compared to the often high cost of traditional payday loans, this alternative option can provide a secure and affordable way to cover an emergency. The only difficulty is in finding these loans. Payday Alternative loans (PAL’s) are comparatively new to the market and are difficult to find outside of a few major credit unions. You’ll likely need some proof of income to qualify.

Paycheck advance

Reach out to your employer. Most employers are willing and able to provide a paycheck advance if you fill out a request form. Paycheck advances can either come from earned wages or as an installment loan. An advance on earned wages is generally interest free – however since this amount is based on the work you’ve already done through a pay period, the amount of the cash advance may be small.

Your employer may also offer paycheck advances in the form of an installment plan. These advances are usually based on future work, with your payments being automatically deducted from your paycheck. While advances are less costly than a traditional payday loan, it’s important to balance your installment payments with other paycheck deductions.

Friends, family, and community

An often overlooked option for cash funding is the community around us. Lending from friends and family can be a great option, however it’s important to treat the loan as serious as you would from any other lender or financial institution. Lending can be emotional, “defaulting” on your loan with a friend may not damage your credit score but it will impact your relationship.  

When lending from someone you know, it’s best to formalize the process. Create a written loan agreement detailing when and how you will make your payments, what happens if you’re not able to make a payment, interest cost, and other important details. By agreeing to a formal loan agreement, the loan should feel fair to the lender and the borrower.  

Some community and faith-based organizations also offer low-interest or even no-interest lending options. Make sure to research city-run programs and lending options from local non-profits. If you are a member of a religious community, you may be able to receive help from those around you.

Signature Loan with No Credit Check: Pros, Cons, & Alternatives

A signature loan — also known as a good faith or character loan — is an unsecured loan that uses only the borrower’s signature and promise to pay to lend money. That’s where the name “signature loan” comes from — a borrower using only their signature to get a loan. Many personal loans can be considered signature loans.

A signature loan without a credit check is rare. Be careful of misleading content and advertising across the internet about signature loans with no credit check. Because signature loans are unsecured and do not involve collateral (unlike a car mortgage, house mortgage, or title loan), it’s extremely unlikely a lender will lend significant amounts of money without doing some type of credit check. More likely, a signature loan without a hard or soft credit check is structured as a payday loan, cash advance, short-term loan, or other type of no credit check loan.

A signature loan with no hard credit check includes an installment loan from Possible. You can apply, get approved, and take out a loan up to $500 in minutes… and Possible doesn’t check your FICO credit score. Repay the loan over time and build credit history, similar to personal loans and other lower APR loans.

So, let’s dive deeper on the difference between a signature loan, payday loan, and title loan?

Signature loan vs Payday loan vs Title loan

Signature loan. A signature loan is another name for an unsecured personal loan or non-collateral loan. If a loan is unsecured, it means no collateral (asset lender accepts as security for a loan) is attached to the loan. If you cannot repay your loan back, the lender has no collateral to collect or seize. This is different from a home mortgage, as an example; if you fail to pay your mortgage, the lender may foreclose on your home. A signature loan will usually require a credit report because the lender must determine whether they will lend to you and how much. Loan amounts can range on signature loans but are generally a few thousand to ten thousand dollars. APRs are usually 5 to 36% and terms can range from a few months to several years. Similar to offline and online installment loans, signature loans are usually repaid in portions throughout the term of the loan.

Payday loan. A traditional payday loan is an unsecured loan usually repaid within a few weeks. A payday loan usually has an annual percentage rate of interest (APR) of 400% or more and is repaid in a few weeks, usually on the borrower’s next payday. Payday loans can be considered a type of signature loan but is meant to be used for more of an emergency expense or last-resort option. Some payday loan lenders, especially the online lenders, run credit checks but others do not. In either case, bad credit or less-than-perfect credit is usually OK and you don’t need a great FICO score to apply. You’ll need to bring your proof of income, a state-issued ID, and a post-dated check or information on your checking account when you’re applying for your payday loan.

Title loan. A title loan is a secured loan that uses your car as collateral for the loan. APRs tend to be over 100% and the term of the loan is usually short. Be careful — if you fail to repay your title loan, you can lose your car! Title loans are usually used as a last resort and is considered expensive compared to signature loans and other forms of borrowing.

Terms for a Signature Loan

• Interest Rate: The interest rate on your signature loan will drive how much you pay in interest costs. You’ll need to understand how the interest rate converts into an annual percentage rate (APR) on your loan. There are usury laws in many states and as for some states ban signature loans or unsecured loans over a certain APR. For example, New York prohibits payday lending through criminal usury statutes, limiting loans to 25 and 30 percent interest respectively.
• Term: The term is the length of the loan. It can vary from a few months to multiple years. Some unsecured loans can even have a term of 5 years! How long the loan is outstanding has a direct relation to how much risk the lender is willing to take – the longer the term of the loan, the higher the risk for the lender.
• Origination fee: Some lenders will charge a fee for originating the loan. Usually a one-time fee, the origination fee adds to the overall cost of your loan. This fee, in many cases, is deducted from the loan amount you borrow so the actual amount you receive from your signature loan can be lower than the amount you were approved for and lent out to you.
• Early payoff fee or prepayment fee: Some lenders may charge a fee for paying your loan off early. This is called an early payoff fee or prepayment fee. In some states, an early payoff fee is illegal. This fee adds to the overall cost of the loan and if you plan on paying your loan off faster than the agreed upon term schedule, look for a signature loan without an early payoff fee. Paying off the loan early may still be the right situation for you because you can save interest by paying off a loan early despite an early payoff fee.
• Late payment fee: A late payment fee can be avoided by paying your principal and interest on your signature loan on time. Your credit score can also be hurt if you do not pay on time because the lender will report late monthly payments to the credit reporting agencies and bureaus. If you make a mistake and forget to pay, some lenders may allow for a grace period and waive your late payment fee if you ask.

Application process for a signature loan with no credit check

Many signature loans and unsecured personal loans can be applied for online or at your potential lender, whether that’s a bank, credit union, or other financial institution. You’ll likely need the following:

• Personal information
• State-issued ID
• Proof of income or credit reports
• Social security number

Most lenders will run some sort of credit check to help determine whether to lend you money and how much money to lend. Other lenders like some payday loan lenders and Possible Finance won’t check your FICO credit score and will use bank account information or other data available to make the lending decision.

Online or mobile applications can take just a few minutes. After the loan application is submitted, a few lenders may get back to you instantly, but most will probably take a few days.

What can you use a signature loan with no credit check for?

The borrower has the choice to use the funds from a signature loan for a variety of different things, including:

• Emergency expenses
• Debt consolidation
• Home improvements
• Major purchases
• Ongoing expenses

Usually, there is no restriction on how the funds are utilized.

Will the lender check your credit score?

Most lenders and financial institutions will check your credit score or run a credit check when you apply for a signature loan or personal loan. Some lenders will have a minimum FICO score of 650 or 700 for these loans. Payday loan lenders may not have a FICO score requirement and may not run a credit check at all.

Lenders can conduct a hard inquiry or soft inquiry on your credit. A hard inquiry may affect your credit score and is usually performed just prior to giving the borrower a loan. A soft inquiry does not affect your credit score but will show up on your credit reports.

If you are looking to rebuild credit or improve your credit score to qualify for a signature loan, you should look into a credit builder loan first. However, it may take many months before your credit significantly improves and building credit history is not a guarantee your score will improve.

Types of signature loan with no credit check and Alternatives

1. Possible loan – Possible has a mobile-only installment loan that allows you to borrow up to $500 depending on state, get the money in as fast as a few minutes, and build credit history. In addition, if you have trouble repaying a payment, you can reschedule the payment directly in the Possible mobile app on the iTunes App Store or Google Play Store.
2. Payday loan – With a payday loan, you can borrow money up to $1,000 with just a paystub (proof of income), post-dated check, and a state-issued ID. You can apply for payday loans online or at a lender with a storefront. Be sure to compare APRs, repayment terms, and fees between various payday lenders. Payday loans have higher interest rates than most signature loans.
3. Payday alternative loan (PAL) – Credit unions may offer payday alternative loans which are similar to payday loans except the annual percentage rate of interest (APR) is much lower. To qualify for a PAL, you’ll need to have an account with the credit union and there may be other requirements.
4. Personal line of credit – A personal line of credit allows you to take money as you need it but up to a certain limit. You won’t need to decide the amount of money you need to borrow upfront. Some people call it a “personal loan that works like a credit card.” However, personal lines of credit may require a credit check or credit inquiry and a minimum credit score to qualify so those with bad credit may not get approved.
5. Peer to peer lending platform – You can borrow money from everyday investors and individuals through a peer to peer lending platform like Lending Club or Upstart. Each peer to peer lending platform may have its own qualifications to apply and get a loan. Peer to peer (P2P) loans often have fixed rates and monthly payment schedules so the structure may be inflexible.
6. Payday advance app – A payday advance app like Earnin, Dave, or Brigit allow you to advance a certain amount of money from your paycheck early. These apps will often track your location and charge a subscription fee or tip for the services. If you need some money quickly and a simple payday advance before your payday can cover your needs temporary, these apps may be the right option for you. They can solve a short-term financial need.
7. Help from family and friends – Not the best option for everyone, but getting help from family and friends may be the cheapest and most viable option for you. Be sure to write an agreement and sign it so you don’t have family disputes crop up.
8. Credit card – You can qualify for some credit cards even with a bad credit score. There are credit card companies that allow for 650 credit scores or even below. Be sure to read the terms and conditions, the APR, and any other terms of the credit card. Compared to a payday loan or higher APR products, a credit card will tend to have a cheaper APR.
9. Cash advance, check advance, and other short-term loans – These names actually all refer to payday loans and short-term loan products like payday loans. The APRs tend to be higher than other options but lenders are less restrictive on your credit and can usually fund money in one business day or even as fast as a few minutes.

Benefits and Risks of a Signature Loan with No Credit Check

Benefits

• A signature loan or personal loan has APRs that vary from 5% to 36% and in comparison to payday loans and other short-term loans, the interest is much lower.
• If there is no credit check, especially for those with bad credit or no credit, that’s great! However, most signature loans will run some type of credit check and have minimum credit scores.
• You’ll have multiple periods to repay. Loan terms for signature loans can range from several months to several years.
• Most direct lenders will report credit history to the credit reporting agencies like Experian, TransUnion, and Equifax. For example, if you have a loan from Possible Finance, as you repay the loan in installments, Possible will report your payments to all three credit bureaus. And you don’t need good credit to qualify.

Risks

• Funding can usually take several business days. Rarely will you be able to receive funds from a signature loan the same day you fill out your loan request, apply and get approved.
• If you fail to pay, your credit score and credit history may be impacted. The lender will report failed payments to the credit bureaus and it could impact your long-term financial health.
• There can be additional fees and charges related to getting a signature loan such as an origination fee.
• Most signature loans have a minimum credit score or some type of credit check. It may happen with a certain term length or loan amount.

Bad Credit Loans: What Should You Know?

Bad credit loans are, as the name implies, loans one can take out with a bad or less-than-perfect credit score. A quick Google search turns up hundreds of thousands of options for such loans from bad credit payday loans all the way to the less-formal pawn shops.

Of course, with so many options, it’s important to know what’s out there to not only avoid the all-too-prevalent scams, but also to find the best option for your unique financial situation. If you’re interested in learning more about how to make the most of a poor credit score (and possibly increase it!), continue along with us as we take a closer look at bad credit loans.

First, we’ll be unraveling some of the mysteries behind credit scores, what constitutes a good/bad score, and what you can do to boost yours. Then we’ll be exploring a few different types of bad credit loans and the average costs involved.  And, lastly, we’ll be looking at bad credit loan alternatives like the one offered by us here at Possible.

Credit Scores: The Good, The Bad, and The Fair

Your credit score—just three short digits—determines the amount you can borrow, the rates at which you can do so, and sometimes, even the places you can live (yes, some landlords require a credit check to rent from them).  And yet, despite their importance, these scores can be confusing and, at times, seem like nothing more than an arbitrary number generated by the credit bureaus. Thus, before we continue with bad credit loans, it’s worth taking a moment to understand how credit scores are determined and what is considered a good/bad score.

The first thing to understand is, contrary to popular belief, there is no single ‘credit score’ or credit report. In fact, different industries will use different scores; when you go to get an auto loan your score may be slightly different than when you go to get a home loan. This is because different lenders value different attributes in who they lend to, so the three major credit bureaus (Experian, Equifax, and TransUnion) generate various scores that cater to a lender’s wants/needs, with the most popular variant being the FICO score. Luckily for us, however, the credit bureaus tend to use five major factors when generating a score:

• Payment History: This is whether you make on-time payments on your debts or not—on-time payments help, and late ones hurt.
• Credit Utilization Ratio: A bit more complicated, this factor looks at how much credit you are using relative to the amount you have available (a credit card with a $5000 limit and a $1000 balance on it would amount to 20% utilization, 1000/5000 = 0.20)—a lower ratio is looked on more favorably than a higher one.
• Age of Credit Accounts: The older a line of credit you have the better it reflects on your credit score (e.g. a year-old credit card looks better than a six-month-old credit card).
• Variety of Credit Accounts: The more diverse your credit portfolio the more it will help your score as it shows you are able to manage your debts well (e.g. having only a single credit card open would be less impactful than having two credit cards, student loans, and an auto loan). NOTE: this does not mean you should recklessly take out lines of credit in an attempt to raise your credit score, always make sure you are able to pay your debts or you will end up doing more harm than good to your score.
• New Credit Inquiries: The number of inquiries on your credit can impact your score in the short term, especially if you have a thin credit file (credit report). If you have numerous credit inquiries in a short amount of time you will find your credit score decreases slightly, but it will rise back up as time passes.

While the weighting of these factors changes depending on the type of score a lender pulls and is kept a closely-guarded secret by the bureaus, you can generally expect your payment history and credit utilization ratio to factor most heavily into your score and to be on your credit report. So, if nothing else, it is important to stay on top of your payments and not overuse your lines of credit.

With all these factors considered, the credit bureaus then generate a score from 300 to 850 with a larger number indicating a more positive credit score. Here is where we can really break down the scores into ‘good’ and ‘bad’. With a good score, you will be better able to receive favorable loan terms while a bad credit score will result in worse terms or an inability to get a loan altogether due to a minimum credit score required. You may be forced to apply for a no credit check loan. Generally speaking, any score below 620 is considered ‘bad’ while anything above it is ‘fair’ to ‘good’.

Fun Fact: your income does not directly influence your credit score, but a 2018 survey showed a good credit score could save you $45,000+ over your lifetime.

So, What Can You Do to Improve Your Credit Score?

The average FICO score in the US currently (2019), according to an Experian study, is 703. This means that the average American is doing pretty well when it comes to their credit score. However, as we all know, averages are not always representative of one’s individual experience and life happens, so what can you do if you find yourself with a less-than-perfect credit score? 

Well, the first thing to do is understand that improving your credit score—no matter how good or bad it is currently—is a marathon, not a sprint. There are no silver bullets or shortcuts on the path to a perfect score and any person or product that claims there is probably isn’t to be trusted. That said, here are some great tips that will get you started on your journey to good credit:

• Be smart with your debts and make sure you have a plan to pay them off when you take them out. Late payments can really hurt your credit.
• Avoid having a high credit utilization ratio if you can avoid it. A good rule of thumb is to keep it below 30% even if it means paying off part of your credit card bill early.
• Think twice about closing lines of credit if you don’t have to. Leaving them open allows your average credit account age to remain high, which helps your credit. 
• Monitor your credit. Keeping tabs on your credit is not only a good way to track your progress, but also to catch any attempts at identity theft.

Lastly, it’s important to remember that, like any journey, there may be setbacks on the road to good financial health. If those setbacks come, don’t be discouraged. It’s just a short-term financial hiccup. The beauty of one’s credit score is that it can be improved with a plan and a bit of time—bad credit is not permanent.

Types of Bad Credit Loans

You don’t, however, have to wait until you have good credit to take out a bad credit loan. Sure, you won’t get the same rates or terms as you might with better credit and you might not qualify for some loans due to a minimum credit score requirement, but taking out a loan with bad credit is certainly possible and sometimes necessary when an unexpected emergency strikes. So, let’s take a closer look together at some types of bad credit loans and the costs involved in taking one out…

Bad Credit Personal Loans

Typical Loan Size: $1000 to $50,000

Interest Rates (APR): 5% to 36%, dependent on credit score

Origination Fee: Usually 0-8% of the loan amount

Loan Repayment Period: 12 to 60 months

Personal loans are taken out from a bank, credit union, or online lender and are typically a longer-term loan (with monthly payments) for a greater sum of money than one might find elsewhere. This makes these types of loans more appropriate for larger emergencies/expenses like damage to your home, medical emergencies, or education. Of note, these loans can also sometimes carry a 0% to 8% origination fee of your loan amounts to cover the paperwork costs. This means a $1000 loan could carry an $80 fee (8% of $1000) for paperwork, which is normally deducted from the loan before disbursement (i.e. your $1000 loan would only be $920).

Some important things to remember when looking for a personal loan when you have bad credit is that you shouldn’t go in expecting to get the lowest interest rate. Lenders such as banks and credit unions will look at your credit score and probably offer higher interest rates. Or they might not give you a loan altogether due to a minimum credit score requirement. Some lenders will also typically look at your debt-to-income ratio or other factors. As such, it is important that you shop around for loans to find the lowest interest rate and origination fee possible. It is also worth knowing about the two types of personal loans:

• Unsecured Loans: Unsecured personal loans are also called ‘signature loans’ because these loans are only backed by your credit score and your word that you’ll repay (i.e. your signature on the loan documents). This type of personal loan is normally harder for bad credit individuals to get and—regardless of credit score—tend to carry a higher interest rate than secured loans as they represent a larger risk for the lender. A good example of an unsecured loan is a credit card.
• Secured Loans: Secured personal loans, on the other hand, differ insofar as they are backed by collateral. This collateral is, most commonly, either a home or a car in the case of mortgages and auto loans respectively. You will find that secured loans are easier to get because the lender feels more comfortable extending the loan (and lower interest rates!). If you don’t make your payments, they can take possession of the property used as collateral until your debt is repaid. Due to this, you will want to consider your ability to pay back secured loans or risk the loss of property.

The Verdict: Personal loans a good way to pay for those larger expenses that crop up in life. They can also be helpful in debt consolidation by using a larger personal loan to pay off your smaller debts and only have to worry about paying a single lender at a single (hopefully lower) interest rate. That said if you need to take one out, make sure you do your research to get the best deal possible for your financial situation.

Bad Credit Payday Loans

Typical Loan Size: $50 to $1000

Interest Rates (APR): 391% to 1000%

Origination Fee: Usually $0

Loan Repayment Period: two to four weeks

Payday loans, cash advances, and short-term loans are always an option when you have bad credit as many store-front and online lenders don’t even bother to check your credit score. However, it is important to know what you are getting into before taking one out as they can be dangerous. Carrying astronomical interest rates, payday loans are often paid back in a lump sum on your next payday (thus the name). Online payday lenders can take money directly from your bank account on your payday. Typically, these loans are smaller in nature and a better fit to cover small emergency costs that come up like a fender bender or unexpected medical bills. 

The Verdict: Even though they will lend to you despite bad credit, payday loans can lead to dangerous cycles of debt that leave you worse off than you were initially because most don’t even report to the credit bureaus. Check your payday lender at NMLS Consumer Access for more information on your lender. It might be worth considering alternatives to such loans like the one offered by Possible or other more customer-friendly options like payday advance apps. For example, Possible has much friendlier repayment terms. If, however, you find yourself without any other options make sure you understand the terms of your loan and have a plan to get it paid off as soon as possible to avoid the crushing interest rate.

What Happens if You Can’t Pay?

Life happens and sometimes you won’t be able to make a payment as scheduled. It isn’t the end of the world, but it is important to understand what might happen. The first thing you might see is damage to your credit; if you are borrowing from a lender who reports to the credit bureaus they will report your loan as in default. Depending on the type of loan (like a payday loan or cash advance) and who your lender is they may report this on the first missed payment or after multiple—it’s worth understanding your lender’s default rules before you take a loan out. 

Beyond damage to your credit, lenders may take alternative actions against you to recoup their debt. Most commonly, they will sell your debt to a collections agency which will then become the entity you are responsible for making your payments to. In more extreme cases, a lender may pursue a lawsuit against you in an attempt to garnish your wages. If you encounter such legal action we recommend reaching out to a qualified legal expert in your area to better understand the steps you need to take.

There is also the consequence of defaulting on a secured loan that we discussed earlier. That said, it bears reiterating: if you default on a secured loan you risk losing the asset you used as collateral for the loan. On a final note, if you know you will not be able to make a payment, we recommend reaching out to your lender to see if they will be willing to work with you on your payments—it is, after all, in their best interest to make sure you are able to repay your loan.

Is There Another Way? Alternatives to Bad Credit Loans

Maybe the types of personal loans we’ve discussed so far aren’t for you, though. We get that here at Possible and, luckily, there are alternatives that might work better for you. So, without further ado, let’s jump right into some alternatives to the types of loans we’ve discussed so far: 

• Secured Credit Cards: Secured credit cards are a great way for those of us who have bad credit to build a better score. These cards are opened by making a cash deposit with a lender such as a bank or credit union who then extends you a line of credit equivalent to the deposit you made (e.g. a $300 deposit would result in a $300 line of credit or credit limit). This allows the lender to repossess the initial deposit if you fail to pay back your debt much like the secured personal loan we looked at earlier. The best part about a secured credit card is that it helps you build your credit as you make payments without the possibility of maxing out your card with no way to pay it back.
• USDA or FHA Loans: Maybe you are looking to become a homeowner, but don’t qualify for a traditional personal loan. Perhaps then it is worth looking into a government-sponsored lending program like a USDA loan (United States Department of Agriculture) or FHA loan (Federal Housing Association). These two programs are designed to help lower credit and income individuals own a home by providing a reasonable loan offer if certain prerequisites are met. For example, the USDA program requires the home you’re looking to purchase to be in a certain location while the FHA program has maximum income limits. If you want to learn more we recommend reading the sites we linked above.
• Title Loan: A title loan, as one might expect, works much like a secured loan with your car title as collateral normally up to $1000. This is different from a normal car loan. This means if you do not pay your debt to the lender then your car could be repossessed to pay off your loan. A title loan is certainly a fast way to get money if you need it, but with 100% to 300% APR interest rates it should be a loan of last resort—you don’t want to find yourself without a car if you can’t pay back the loan.
• Pawn Shop: Made relevant in popular culture most recently by certain reality shows, pawn shops are an institution as old as time. Much like a title loan and more formal secured loans, a pawn shop gives out loans on a collateral basis. You provide the shop with a piece of property—most commonly jewelry, electronics, and other valuable objects—and the shop provides a loan based on the value of the pawned object. Interest rates for these types of loans range from as low as 10% to +240% depending on state regulations. You can also expect to pay for storage and insurance fees based on the object you are pawning. Naturally, if you do not repay your loan in the allotted time your pawned object is sold off to make up for you defaulting on your loan.

There you have it – a few other options for those of you with a poor credit score. There’s even more options we have not mentioned including peer-to-peer lending, borrowing from family or friends, and more. As before, don’t rush into any of these options before researching them yourself—it’s always good to look before you jump, especially when it might be your credit and long-term financial wellbeing on the line. 

Wait, There’s One More Bad Credit Loan Option, What About Possible?

We like to think we’ve saved the best for last. Here at Possible we are proud to offer a strong alternative to traditional payday loans to help you make ends meet without the oppressive interest rates (our rates range from 150% to 200%) charged by most payday lenders. Our installment loan is repaid in four easy repayments and each payment is reported to the three major credit bureaus (Equifax, TransUnion, and Experian). This means that while repaying your loan on time you are actually helping build your credit history—it’s a win-win, you get the money you need and hopefully improve your credit score!

Though, as we’ve counseled throughout this article, don’t just take our word for it, do your own research and see what our customers have said about us in the app store. And, if it interests you, download the app to submit your loan application. It only takes a few minutes and you could be approved for a loan and get up to $500 the same day!

Same Day Loans: How They Work & Who Can Get One

Same day loans are loans where you get the cash you borrow the same day you apply. Many lenders and lending companies claim to be able to get you cash the same day you request it, but be careful – the convenience can come at a cost and the funding might not be on the same day!

For example, many personal loans use ACH (automated clearing house) to deposit the funds into your bank account. The ACH process can take one business day to three business days so even if you get approved on the same day as you requested the loan, you might not receive the funds until three business days later – when you don’t need the money anymore.

Same day loans are also referred to as emergency loans or same day payday loans. Why would someone need money that fast? Maybe you’ve lost your job, need your car fixed, or rent is due tomorrow. Many of us have been in urgent situations where cash is needed immediately.

What if I have bad credit or no credit score?

Even with bad credit, you may qualify for certain same day loans such as payday loans, title loans, and secured loans. However, if you don’t want a credit check at all, no credit check loans may be the right option for you.

Depending on which lender you use for your same day loan, your credit score and credit history can have an impact on whether you get approved on your application for a same day loan. For personal loans, you’ll usually need credit scores of 600 or above. A personal loan is money borrowed from a bank, credit union, or other lender that is repaid in installments in 2 to 5 years and usually between 6% and 36% annual percentage rate of interest (APR). It can have specific qualification criteria and is significantly harder to qualify for than a payday loan, cash advance, or other secured loans.

For payday loans and alternatives to payday loans online, your credit score and credit history may not matter at all. Payday lenders usually require proof of income, state-issued ID, and an active bank account as part of the loan application. So even if you have a less-than-perfect credit score or even no credit history at all, you may still get the money you need. With a loan from Possible (a type of online installment loan), you can get money in minutes even with bad credit, repay in multiple installments, and build credit history.

How can I receive the money same day?

There are a few ways you can receive money from a same-day loan immediately or almost immediately, like within an hour:

• Receive cash. Payday lenders and other lending companies that have a storefront can disburse money to you in the form of cash. There may be additional requirements or restrictions to allow for receiving money in the form of cash on the same business day.

• Receive money on your eligible debit card. With a debit card, both storefront and online lenders can put money directly on your debit card. Expect to receive funds after your same-day loan request in a few minutes. Some lenders may charge fees to instantly disburse funds to your debit card so check the fine print. There are no fees to disburse money to an eligible debit card when getting a same-day loan from Possible.

• Bank wires and wire transfers. A common type of money transfer is through bank wires and wire transfers, and same-day options are available. It usually takes several hours for the receiving bank to show that the wire proceeds are in the recipient’s savings or checking account, even if the money has already been sent.

• Instant or same-day ACH transfers. Some financial institutions and lenders make same-day ACH transfers available. This requires a three-times-a-day settlement schedule (the bank must offer this) and the bank must support the ability to process outstanding requests three times a day. For example, you can get approved for a loan early in the morning and a funding transaction is sent by 9:30 AM. With a same-day ACH transfer, the request should be processed by 1 PM on the same day.

Types of Same Day Loans

• Payday loan. A payday loan or cash advance is a short-term unsecured loan usually repaid on your next payday. To apply for a payday loan, most loan providers require proof of income, an active bank account, and state-issued ID and you’ll need to sign a loan agreement. Most payday loans have same-day funding options including cash if it’s a storefront lender or on debit card if it’s an online payday lender. Because the annual percentage rate of interest (APR) for which payday loans average around 400%, only use a payday loan when it’s the best option for you. Some payday lenders also lend out online installment loans which are similar but repayment is over multiple pay periods.

• Possible loan. Possible offers mobile-only installment loans that are repaid over time and builds credit history. You don’t need good credit and you can apply, get approved, and receive money in minutes on your eligible debit card or in 1-2 days in your bank account. Repay the loan in multiple installments and build credit history – Possible reports bi-monthly payments to all three credit bureaus: Experian, TransUnion, and Equifax. A Possible loan has an APR of 150-200% depending on state, much cheaper than traditional payday loans online or with storefronts, bank overdraft fees, and payday advance apps that require membership fees and/or tips.

• Title loan. A car title loan, also called a “pink-slip” loan, title pledge, or title pawn is a short term secured loan using your car as the collateral. If you cannot repay the loan, the lender will seize your car. Title loans tend to have triple digit interest rates and are for 15-30 days. The loan amounts tend to be 25-50% of the car value. Be careful about additional fees and add-on costs on title loans like a vehicle roadside service plan and roll-over fees. Roll-over costs and fees can happen when you can’t pay off the loan during the typical term of the loan and the lender may offer to roll over your title loan into a new loan.

• Pawn shop loan. To get a pawn loan, you go to a pawn shop with personal property with resale value. You leave the personal possession as collateral, the pawn shop assesses the value (usually 25-60% of resale value) of your personal property, and gives you a loan. APRs are usually around 200% and to receive your personal property left as collateral back, you’ll need to pay off your loan with principal, interest, and additional fees within the agreed-upon time, usually 30 days. Pawn loans don’t require a credit check or bank account and you can receive money in the form of cash.

Alternatives to Same Day Loans

• Credit card. A credit card lets you spend money on credit. You are borrowing money from a bank to make purchases. Credit card annual percentage rate of interest (APRs) are under 36% but there are specific credit score and other requirements for you to apply and get approved for a credit card.

• Payday advance app. A payday advance app like Earnin, Dave, or Brigit will advance you cash in advance of your payday from your employer. However, you’ll need a steady job, a smartphone with location tracking, and an active eligible bank account to get the payday advance. In addition, watch out for membership fees, subscription fees, tips, and instant transfer fees on a payday advance app that can add up. Although these fees are not quoted in the form of an APR, the APR can be higher than payday loans and other borrowing options and payday advance apps don’t follow state and federal lending laws.

• Personal loan. A personal loan is an unsecured fixed rate loan usually repaid in monthly installments over a specific term – for example, 3 years. Interest rates and whether you can qualify will vary by lender, your credit score and credit history, and your debt-to-income ratio. Usually APRs are lower than 36% but there can be an origination fee. You can get a personal loan from many major banks, credit unions, and online lenders. However, it takes more than a day on average or even up to a few weeks to receive money on a personal loan.

• Student loan. A student loan is a type of loan designed to help students with financial costs of post-secondary education. The interest is substantially lower than other loans and the repayment may be deferred until the student has finished school. There are two main types – federal student loans and private student loans.

• Payday alternative loan. A payday alternative loan, also called PAL, is a short term unsecured loan offered by some credit unions. PALs have lower fees than payday loans and there are restrictions on how many of these payday alternative loans a borrower can take out in a 6 month period. Loan amounts are $200 to $1,000 and repayment terms are one to six months. Because the APR is much lower on a PAL, loan offers are contingent on being a member of the credit union and demonstrating basic financial qualifications such no recent bankruptcy.

• Friends or family. Although it can be embarrassing to borrow money from friends and family, this could be the best option to make sure you do not fall into a vicious debt cycle of borrowing money, rolling-over debt, and using more traditional loans to repay existing debt. Ask your close family members or friends whether you can borrow some money from them. Agree on a repayment plan and term that works for all parties and signing a written document might soothe long-term implications on the relationship. Especially if you can’t pay your family member or friend back.

• Selling personal assets. With online consignment stores and other online resale options such as eBay and Craigslist, you may have valuable personal assets you can convert into money for cash needs. If you can sell your personal assets quickly, you may be able to receive cash same-day or in a few days, depending on what venue you are selling your assets on.

Benefits and Risks of Same Day Loans

Benefits

• You will receive the money you need immediately. Some emergency expenses such as car repairs, medical bills, or childcare expenses just can’t wait. Having money today when you actually need it and boosting your short-term financial situation can at times outweigh any costs associated with it. And with Possible, you won’t even need to leave your house!

• Qualifying for same day loans can be easier than credit cards, personal loans, and other alternatives. Because a payday loan, title loan, or other alternatives doesn’t require good credit and in some cases, not even an active bank account, same day loans can be easier to qualify for. With Possible, applying only takes an active online bank account, state-issued ID, and a smartphone.

• Personal and payday loans are unsecured loans. There’s no chance you’ll lose your house or car if you default on your loan.

Risks

• Costs are higher than other loans. Annual percentage rate of interest (APRs) are easily over 100% and many times, even 300-600%. Also be aware of fees and additional costs associated with same-day loans online or in a storefront such as an instant transfer fee, often charged for funding money directly to a debit card.

• Not paying back the same-day loan could reduce your credit score. Although some payday loan lenders don’t report repayments to credit bureaus, not paying back a loan can hurt your credit history. There are alternative credit bureaus that have credit reports and monitor whether you have outstanding payday loan, cash advance loans, or other debt. With Possible, you’ll get the benefit of on-time payments which will build positive credit history.

Check Advance 101: Everything You Need to Know

A check advance is a small short-term unsecured loan usually repaid on the borrower’s next payday. Check advance loan, payday loan, cash advance, and short-term loan are common terms that reference the same product. The term “check advance” came about because a borrower is essentially getting an early cash advance on his or her next paycheck with the obligation to repay this advance once the borrower is paid.

With the advancement of technology, check advances and payday loans are getting friendlier and easier to obtain. A borrower can access check advances online or on their mobile phone. In addition, instead of just looking at a pay stub, some lenders are underwriting loans based on a diverse set of criteria that may be easier to obtain or a better indication of borrower repayment ability.

For example, Possible is a popular alternative to traditional check advances and payday loans. Via the mobile app, you can get up to $500 in minutes even with bad credit or no credit. Rather than repaying the full amount plus interest on your next payday, you have multiple pay periods to repay the loan. As you repay, Possible reports to credit bureaus to help build credit history. In short, with Possible, fees are cheaper, the process is simpler, and the repayment is much friendlier than traditional check advances, helping you improve your long-term financial health.

Check advances vs Payday advance apps vs Check cashing

Check advances, also called a payday loan, are often confused with payday advance apps and check cashing. Even though all of these products allow you to accomplish a similar thing by giving you access to the money you need, there are significant differences.

Check advance. A check advance, like a cash advance or payday loan, is a small dollar short-term borrowing usually repaid on your next payday. Traditionally, a lender looks at your proof of income, usually a paystub, along with your state identification to determine whether they will lend to you. The amount borrowed is due on your next payday, or for certain payday loan products or alternatives, can be due as far out as 3 months out.

Payday advance apps. These apps, including Earnin, Brigit, and Dave advance you money before your payday. These payday advance apps do not follow state or federal regulations around lending and do not consider themselves loans. In many cases, these apps will track your location to make sure you are going to work. If you took an advance, the apps will then collect the advance on your payday plus tips and/or any other charges. Because these apps are not considered “loans” in the traditional space, they make money for their service in a variety of ways including subscription fees, tips, and membership charges. And because they are not considered loans, they do not report on-time or missed payments to the credit bureaus.

Check cashing. Check cashing is simply the service of being able to cash a check you’ve received. Most banks will cash your personal check for free if you have a checking and savings account with the bank – however, the funds are not available for 1-2 business days. Consequently, alternatives financial companies such as payday lenders and even Walmart have a service to cash your check for a small fee. The money from your check is immediately available in cash or on your debit card.

Costs of a Check Advance or Payday Loan

A payday lender typically charges fees as  a percentage of the dollar amount borrowed. Fees can range from $10 to $30 per $100 borrowed, depending on state regulations. The most common fee is $15 per $100 borrowed. Assuming a 2 week check advance, $15 per $100 borrowed converts to about a 400% annual percentage rate (APR). Depending on specific loan terms and fees, some payday lenders charge up to a 700% APR! In contrast, a Possible loan has an APR of 150-200% depending on state and repayment term. Loans from Possible are repaid over a couple months in installments, reducing the repayment burden o  n borrowers. By repaying installments, borrowers can also build credit history and improve their financial health.                   

Many states cap the maximum rate a lender can charge for a check advance, cash advance or payday loan or they may outlaw such products altogether. Be sure to check the maximum APRs for your state. For example, New Mexico has a maximum APR of 175% and New York does not allow check advance loans.

There could be indirect costs to a check advance such as non-sufficient funds (NSF) fees, returned check fees, or debit card fees – all considered overdraft fees. For example, if you get a check advance deposited directly on your debit card, many payday lenders will charge an additional fee such as $3 to get you the money so quickly. In contrast, Possible does not charge any debit card transfer fees. NSF fees can also become an issue if you do not have enough money in your bank account to repay your loan. To reduce these fees, make sure you always have enough in your bank account or consider an overdraft loan or line of credit.

How to get a check advance

Same as a payday loan or cash advance, to qualify for a check advance, most lenders will require:

1. A state-issued ID
2. An active bank account
3. Proof of income, usually a pay stub

To apply for a loan with Possible, we require at least:

1. A state-issued ID
2. An active online bank account
3. A smartphone

Whether online, on your phone, or in-person, you will input information and submit an application for a loan. The time this takes can vary by lender from 1 minute with Possible to as long as 15-20 minutes at payday lending stores. If you are at a payday lending store with a storefront, you may also be asked to write a post-dated check for the payday lender to cash if you fail to repay the loan on time.

Once the loan application is received, you may be approved instantly, usually called an “instant decision,” or it may take a few minutes up to multiple days. This varies significantly by lender and is based on the underwriting criteria the lender is using to determine whether you will be approved for your check advance or payday loan.

Once approved, you can accept your loan by agreeing to and signing your loan documents. Be sure to review all documentation along with terms and fees before getting your check advance loan. After you accept your loan, you should receive your loan disbursement in cash, on your debit card, or in your active checking account.

Will lenders check my credit?

Yes, lenders, may check your credit history but not always in the way you expect. For example, many check advance lenders will check alternative credit sources such as Clarity Services rather than bureaus you are more familiar with such as Experian, TransUnion, and Equifax. Although these credit checks do not affect your FICO credit score, they may influence your ability to get credit from banks and other financial institutions such as payday lenders.

If you have no credit report or bad credit, no credit check loans may be the best option for you. In addition, many customers that have gotten a loan with Possible have no credit history or bad credit. We use alternative credit sources such as Clarity to reduce fraud and we believe in our customers. We want to make positive financial health possible for you, our customer, and we want to approve as many loans as we can. If you have any questions about our process, contact our customer service at [email protected]

Types of check advances and alternatives

Brick and mortar payday loan stores. Most cities where payday lending is legal under state laws have payday loan stores where you can get a loan. Remember to bring your ID and paystub when you go. You can get payday loans or other short-term loans from these stores.

Online check advances and payday loans. Most payday lenders have an online application where you can apply, get approved, and receive cash in your bank account. The online application process can be simpler and faster than getting a loan in person. However, be careful about scams and read reviews and research into the online payday lender you are using. Loan amounts can vary from $100 up to $1,000.

Online installment loans. These types of loans are repaid over multiple installments. Mortgage and personal loans are a type of installment loan. However, some payday lenders are abusing the installment loan structure so be careful which installment loan products you use. Possible loans are structured as a friendlier, cheaper, and more flexible installment loan for our borrowers.

Car title loans. Title loans are secured loans, in this case secured by a car title, usually repaid after a short time period. If you fail to pay back your loan and since the loan collateral is your car, the lender can seize the collateral, your car. These loans can be expensive and dangerous so they should be used with care.

Payday advance apps. As mentioned earlier, payday advance apps allow you to access the money you earn through your job early in the form of an advance. Once your payday arrives, you’ll need to repay the advance back. Since it’s not a loan, you won’t build credit history and there is no interest. However, there can be membership fees, transaction fees, and tips. Just keep in mind that these fees (like a monthly maintenance fee) add up and can be high when converted into an APR.

Payday alternative loans (PAL). These loans are offered through participating credit unions. PALs have lower interest than traditional payday loans, although the interest may still be higher than personal loans and student loans. Repayment is usually from 1 to 6 months and repayment history is reported to credit bureaus. A PAL offer is contingent on being a member of a participating credit union.

Credit cards. If you have the minimum credit score, usually 600 or 650, for a credit card, this may be a good option for you. You’ll need at least OK credit history, your credit utilization ratio can’t be too high, and there may be other factors. APRs can range but usually top out at 36%. You may not qualify for a traditional credit card so secured credit cards may also be an option. A secured credit card is one where you have to deposit cash as collateral to use the credit card. Your card account balance usually cannot exceed the cash collateral. This limits the credit card issuer’s risk to you not paying your credit card. However, you may not have money to secure your credit card in the first place. 

Cash from family or friends. Asking for money from close relatives or friends, although not ideal, can still be better than taking on too much expensive debt. If you’re looking to build credit history, borrowing money from family or friends will not build credit history. Evaluate your personal financial situation and determine what’s best for you.

Benefits and Risks of a Check Advance or Payday Loan

Benefits

• If you get the borrowed money in cash or on your debit card, you can receive funds in a few minutes. If you choose to receive funds in your bank account, it can take 1-2 business days via ACH (automatic clearing house).
• You may get approved even with bad credit or no credit history. Because payday lenders do not tend to look at FICO scores, you will have a better chance of getting approved, especially if you failed to pay back credit cards or went through bankruptcy.
• Lenders are fully transparent on interest, fees, and other charges. You’ll know exactly how much you’re paying to get the loan as payday lenders follow state and federal regulations as well as the Truth in Lending Act (TILA). There is no confusion around membership fees, subscriptions, and/or tips.

Risks

• Know how much you’re paying in interest and fees when you borrow money. Annual percentage rates (APRs) for interest on check advances, cash advance loans, and payday loans are higher than other borrowing options such as personal loans, mortgages, student loans, car loans, and credit cards. Depending on your credit score and your financial situation, a check advance or payday loan may not be the right product for you.
• Only take out a check advance if you fully plan on repaying the loan back. Defaulting on a payday loan can result in unintended consequences and undue stress. The financial solutions you have may be limited. In addition, some lenders have more charges and fees for “rolling over” your current loan. Rolling over a check advance can cause interest to stack up and put you in a vicious debt cycle — that’s why some states have laws banning or limiting rollovers.

When to get a check advance

A check advance or payday loan can be useful in the right situation, especially for those living paycheck to paycheck. Because you don’t need great credit and can get money quickly, it can be useful in sticky or stressful situations where you need emergency cash. Furthermore, with a loan from Possible, there are lower fees, more flexibility around repayment, and ability to build credit history. A Possible customer borrow loans to help with:

1. Emergency expenses and unexpected expenses such as car repair and medical bills
2. Normal expenses such as childcare, rent, utilities, etc. when income is tight
3. Temporary protection for bank overdrafts and other bank expenses
4. Credit-building or building credit
5. And many other cases

To apply for a loan with Possible, download our app on the iTunes App Store or on the Google Play Store.

What is a 1 Hour Payday Loan & How to Apply Today

A 1 hour payday loan is a short-term loan where you will receive the cash you borrowed within 1 hour. The almost instant loan is usually repaid when you get your next paycheck. Because you must apply, get approved, and receive the cash within an hour, most payday lenders and other short-term lenders do not do this. However, some lenders do pull this off and there are two common ways to receive funds quickly:

• Debit card. Money from a lender can be sent directly onto your debit card. Only certain cards such as Visa or Mastercard may be eligible. The process usually takes a few minutes.

• Cash. Some payday lenders allow you to pick up your cash on the spot at the payday loan branch. There may be additional qualifications and requirements to receive your loan in cash versus receiving your loan via ACH (automatic clearing house).

Do 1 Hour Payday Loans Really Exist?

Yes, they do exist. Many payday lenders who do not offer 1 hour and fast funding options will tell you this is impossible. But due to technology and friendlier lending, 1 hour payday loans do exist and are widely available.

What is a Payday Loan?

To understand 1 hour payday loans, it’s helpful to know what a payday loan is. A Payday loan can also be referred to as a payday advance, salary loan, cash advance, small dollar loan, or a short-term loan. It is a small, short-term unsecured loan, usually repaid at the borrower’s next payday. Loan amounts can range from as little as $100 to $1,000. Usually some verification of employment or source of income is done as part of the underwriting process but it can vary by the lender. Lenders may also request other documentation. These types of loans are regulated by both federal and state governments in the US and because the annual percentage rate (APR) of interest is high, certain states have unique restrictions or bans on payday loans.

In the traditional retail model of payday lending, borrowers visit a brick and mortar payday lending store and secure a small cash loan with payment due in full at the borrower’s next paycheck. The borrower signs a loan agreement and writes a postdated check to the lender in the full amount of the loan plus interest, fees, and any other charges. On the maturity date of the loan, the borrower is expected to return to the store to repay the loan in person. If the borrower does not repay the loan in person, the lender may redeem the borrower’s postdated check. If the account is short on funds to cover the check, the borrower may now face a bounced check fee or a non-sufficient funds (NSF) fee from their bank plus the costs of the loan. The payday loan itself may incur additional fees or an increased interest rate or both as a result of the failure to pay back the loan on the maturity date.

More recently due to technology, borrowers can complete the entire loan application online. The funds are then transferred by direct deposit to the borrower’s account, and the loan repayment and/or the finance charge / fee is electronically withdrawn on the borrower’s next payday.

Possible takes this two steps further with a friendlier alternative to traditional payday loans. Borrowers can apply, get approved, and receive money in minutes through an iOS or Android mobile. APRs are 2-3X lower than traditional payday loans, borrowers have multiple pay periods to repay the loan, and payments are reported to credit reporting bureaus, allowing borrowers to build credit history. Applicants with bad credit or no credit history can still get approved and repayments can be rescheduled in the app. Possible is a new and better way to borrow.

Will the lender check my credit score?

For many 1 hour payday loans as well as other payday loans, the lender will not take your credit score into account. Possible does not use your FICO score when determining whether to lend money to you. That’s why many Possible loan customers have FICO scores below 550. However, most payday lenders as well as other participating lenders will run some type of credit check and request approval to run a credit check, even if they don’t use your credit score. If you’re looking for loans that don’t require any credit checks, no credit check payday loans may be the best option for you.

The credit check they run is usually a soft inquiry or soft pull. A soft inquiry or pull happens in a number of situations which may include

• Company background check before hiring you
• Credit card company checks to see if you qualify for a product they have
• Payday lender checks if you’ve defaulted on other loans before

Unlike hard inquiries, soft inquiries do not affect your credit score. However, they may or may not be found in your credit reports, depending on the credit bureau the lender used to run your soft inquiry.

Requirements for a 1 hour payday loan

Most payday lenders will require a borrower to have valid ID, an active bank account, and proof of income. Most lenders will request proof of income like a pay stub to determine whether you will repay the loan back. They usually won’t consider other sources of income such as cash-only jobs.

There may be additional requirements to receive the loan disbursements in cash on the spot. If the lender does not have a checking account on file to withdraw the money once the loan is due, the lender is taking on additional risk. To receive the loan disbursements on your debit card, you’ll need to have your debit card information and preferably your physical debit card. When the loan is due, funds can also be withdrawn directly from your debit card on file.

With a Possible loan, borrowers can receive money in minutes on their Visa debit card. You’ll need a valid ID, an active online bank account, and a mobile phone to apply for a Possible loan.

Where to get a 1 hour payday loan

You can get a loan online, in person, or on your phone depending on the lender you choose to go with. We recommend to always get an offer from a direct lender – there are many online sites and services that will sell your data and will spam call or contact you. You can also check the NMLS Consumer Access to verify your lender.

Here are a variety of options for you:

• Payday loan storefront or a “brick and mortar” payday lender. You will need to go in person and ask whether they can disburse the money to you in cash or on your debit card. Be sure to bring the request form or required documentation such as your paystub. In Seattle, Moneytree is an example of a lender with storefronts.
• Online payday lender. There are a variety of online payday lenders. Be careful when you are searching online as you can come across scams or a disreputable financial service provider. An example of an online payday lender is LendUp.
• Payday loan mobile alternative such as Possible. You can apply, get approved, and receive money in minutes through Possible app. Some payday loan lenders have a mobile app as well but none are as quick, polished, secure, and friendly as the Possible loan app.

Benefits and Risks to a 1 hour payday loan

These types of loans have both benefits and risks. Please do your own diligence and research before getting a 1 hour payday loan.

Benefits

• Money can be received within an hour and this is one of the only short term cash options. This is perfect for emergencies or unexpected expenses (car repair) when you don’t have the cash right now to pay for it.
• Many lenders do not require a high credit score and some do not run a full credit check. Therefore, even if you have bad credit or no credit history, you may be approved.
• There are a variety of different lenders and offers and you can get a loan from a payday loan store, online, or even a mobile app like Possible’s loan.
• Applications tend to be simple and loan requests fast. You’ll usually just need an ID, proof of income, and an active bank account to borrow the money you need. Although the application process time can vary by lender, it usually ranges from a few minutes to 15 minutes. In contrast, online personal loans, mortgage loans, credit cards, and other types of debt can take much longer to apply for.

Risks

• 1 hour payday loans have high interest (APR) rates. There are even states where payday lenders charge 700 percent interest! Many lenders charge 500% or more APR for a payday loan. Rest assured, Possible charges much less, ranging from 150-200% APR depending on state. These APRs are still higher than traditional loans like personal loans and mortgages.
• Borrowers can get into a cycle of debt. Because most payday loans are repaid in full (principal plus interest and fees) on the next payday, if a borrower cannot repay, they may be forced to “roll over” their payday loan and borrow additional money. This can become a vicious debt trap where borrowers cannot get out. At Possible, we believe in improving your financial health long-term so we allow you a couple months to repay and over multiple pay periods. Your repayment is spread out into installments to make it easier for you and reported to the credit reporting bureaus to build payment history. In addition, you can easily reschedule your payments up to 29 days later from the original date – this flexibility goes a long way in allowing our borrowers the space and time to better their financial situation
• Your credit score will likely go down if you fail to repay your payday loan. Lenders may report whether or not you successfully repaid your loan to the credit bureaus: Experian, TransUnion, Equifax, or someone else. Possible reports all payments – on-time and not – to the credit bureaus so you can build positive credit history as well when you repay your loan.

Alternatives to a 1 hour payday loans

There are many situations where you need emergency cash fast. If a 1 hour payday loan is not the best option for you, here are some alternatives where you can get money fast as well:

Loan from Possible. You can get an installment loan from Possible in minutes. You can apply, get approved, and receive up to $500 on your debit card within minutes or in your bank account in 1-2 business days. You don’t need good credit to be approved and you can repay over multiple pay periods. Paying over time allows Possible to report to the credit bureaus, helping you build credit history.

Cash advance from payday apps. There are payday advance apps such as Earnin or Brigit that allow you to advance small amounts of money (usually $100 initially) before you get paid. However, you’ll need to allow location tracking on your mobile phone and the app will need to have proof of you going to work. That’s how the app determines whether they’ll advance your work paycheck early. Once your payday arrives, the app will get the money it advanced to you directly from your bank account.

Title loan. A car title loan is a secured loan that uses your car as the collateral. If you cannot repay your loan, the lender has the right to claim your car. These loans usually have high interest and fees and can be dangerous, especially if you need your car to get to work. Whereas payday loans are unsecured and has no supporting collateral, title loans use your car as collateral. Make sure you can repay your loan or you risk losing your car!

Pawnshop. Pawnbrokers offer secured loans that are backed by collateral, usually personal property. This can include jewelry and other valuable personal possessions. The items “pawned” or called “pledges” or “pawns.” If an item is pawned, within a contractual period of time the pawnshop may redeem it for the amount of the loan plus agreed-upon interest. The amount of time, and rate of interest, is governed by law and the shop’s policies. If the loan is not repaid within the time period, the pawned item will be offered for sale to other customers by the pawnbroker.

Advance from your employer. Some employers such as Walmart allow employees to get an advance on their paycheck through third party affiliate apps and services. Please research into the terms and specifics of an advance from your employer before getting it.

Borrow from your family. You may be able to borrow money from your family members or close friends. Although it can be embarrassing and is certainly not ideal, depending on your situation, it can be better than getting a payday loan, title loan, or other alternative.

What happens if I can’t pay back my payday loan?

Many lenders such as Possible can help extend the repayment date of your loan and give you a grace period if you are having trouble repaying your loan. Be proactive and contact your lender if you think you will have a late payment. Defaulting on your payday loan is also an option and in some situations, may be the right decision for you.

However, not paying back your loan can result in many consequences which may include:

1. Extra fees or interest
2. Lower credit score
3. Difficulty in obtaining future loans
4. Ongoing stress and anxiety about repayment
5. Unfair criminal prosecution

However, there are many strategies and financial solutions to help you manage your situation. For example, Possible believes in trusting our customers and we integrate that trust through our fund recovery and collections process. We believe in doing the right thing for you, our customer, and making sure that even in the stickiest situations, we make the best of it to improve your long-term financial health.

Bad Credit Payday Loans: Basics & Alternatives for Poor Credit

“Bad credit? No credit? Less-than-perfect credit? No problem!”

We hear this all the time on TV commercials, the radio; we sometimes even see it plastered on billboards! But is having bad, little, or no credit history truly no problem for some lenders? 

The thing is, sometimes we just need a little extra help to make ends meet. There could be an emergency that requires immediate cash. Maybe your next paycheck is short some hours. An unexpected doctor or vet bill. Life happens. Whatever it may be, you could find yourself stranded and in need of cash quickly. When you have good credit, it is usually quite easy to get financial assistance. However, when you have bad or no credit, it can be difficult to get the help you need. So begs the question: when you have poor credit, is it truly possible to loans and the cash assistance from lenders you need? If so, can it be done without you becoming the latest victim of a predatory lender? Are there no credit check loans online, signature loans, credit union loans, debt consolidation loans or payday loans that are better for you?

What are credit scores?

People talk about credit scores often and we all know that the better your score the easier things can be, but despite how impactful our credit scores are to the quality of our daily lives, not many of us understand exactly what affects our score and how they are calculated. So first, it may be helpful to understand what a credit score is and how they are calculated. There are many different types of credit scores, but the most commonly used is the FICO credit score. According to myFICO.com, your FICO score is used by about 90% of lenders to determine your eligibility and level of risk for a loan. It’s pretty safe to assume that your FICO score will be used for most major loan considerations by lenders, such as mortgages, personal loans, payday loans, and other loans. Possible has loans that don’t require a FICO score.

How are credit scores calculated?

Now that’s all fine and dandy, but how is your FICO score calculated? MyFICO.com explains the breakdown as being grouped into five separate categories: Payment History (35%), Amounts Owed (30%), Length of Credit History (15%), New Credit (10%) and Credit Mix (10%).

It’s important to keep in mind that not everyone’s score is calculated exactly the same way. For example, someone who has limited credit history may be scored differently than someone with a longer credit history in some of these categories.

What’s a good credit score and what’s a bad credit score?

Since we now have a general idea of how your credit score comes to be, let’s take a look at what is considered good credit and bad credit for a borrower. A FICO score is a 3 digit number that ranges between 300-850. Most American’s credit scores range between 600-750, according to Experian, with a score of 670-739 being considered “Good”. A credit score of 580-669 is considered “Fair” and 300-579 “Very Poor”. Scores 740-799 and 800-850 are considered “Very Good” to “Exceptional”, respectively. Many personal loans and credit cards are accessible at credit scores higher than 650 or 700. If you are lower than 650, there are limited borrowing options available to you.

What are some bad credit payday loan borrowing options?

Now that we have a better understanding of credit scores, let’s talk about bad credit lending options. We don’t always have the luxury of doing in-depth research on different loan options. When you are in a difficult situation financially and in desperate need of cash, you can’t always weigh multiple options. You just need the cash and you need it now.  But with bad credit, a credit card or personal loan is probably unavailable to you.

So are there any loan options for folks with poor credit? Yes, there is. Are there bad credit debt or loan options that can also provide a 100% guaranteed approval? No, there is not. However, that does not mean all hope is lost.

Folks with bad credit can instead apply for loans that do not perform a credit check. These types of loans typically use other means for determining your eligibility, such as your income, average cash flow, collateral, etc. With these loans, you will be required to repay the full amount in one lump sum, or over the course of multiple payments. High-interest rates and fees typically apply, as well.

So what are the different types of bad credit loans? Currently, there are two types: Unsecured and Secured. Here’s what each of these means:

Unsecured Loans

An Unsecured loan is commonly referred to as a payday loan or a cash advance. Personal loans are also an unsecured loan but it usually requires a higher credit score. Lenders will use your recent pay stub as part of the loan application to determine how much they believe they can safely lend to you. The amounts are small and you are usually required to repay the loan by your next pay period, or a 2-4 week loan term. 

The amount of money you can borrow is also based on where you live as most states have restrictive lending laws for small dollar, short-term loans. The interest rates from a lender also tend to be very high, up to 700% APR in some states. Lenders may also choose to deny your loan request if they believe you don’t make “enough”, as they require you to meet minimum salary requirements. Something as small as a recently bounced check or returned payment can also be the tipping point on a loan approval decision for a borrower. 

Payday loans are often predatory. If you miss a payment or are unable to repay on time, you may be forced to take out another loan from your lender to roll your previous loan into. This just continues to build on to your existing debt and makes it even more difficult to pay off your loan. According to the Consumer Financial Protection Bureau, or CFPB, nearly 80% of payday loan borrowers end up having to roll their loans over into a new loan. Meanwhile, over 60% of payday loans have borrowers paying more in fees than the originally borrowed loan amount. This can leave people with a lot of debt and in an incredibly vicious cycle and in a lot of cases, can be financially crippling.

Getting an installment loan from Possible is a much better alternative than using a traditional payday loan. The annual percentage rate (APR) of interest is much lower – 150-200% APR usually, repayment is flexible over multiple months, and you can build credit history unlike a traditional payday loan. Therefore, you’ll have the possibility of improving your credit with on-time loan payments.

Secured Loans

There is also something called a secured loan. Secured loans typically offer larger loan amounts and are “secured” by some sort of collateral. In most cases, this will be a car title or a home. Sometimes it may be property or even stocks. Basically, the lender is taking a risk by lending to you so they want to make sure they can get their money back if you’re unable to repay. A secured loan from a lender is a good option if you are needing more than just a few hundred dollars. However, there is much higher risk on you as a borrower if repayments become too difficult, as you could potentially have the collateral you used to get the loan repossessed. So borrow money with caution!

While unsecured short term loans for bad credit are typically in the $100-$1000 range, a secured loan can range between $1000-$25000. Unsecured loans have much higher interest rates, as the expected repayment period usually does not exceed one month. A secured loan will have lower interest rates, typically between 18%-36%. However, that can add up very quickly if you are repaying over the course of several years. For example, for a secured loan of $5,000 with a 60-month repayment plan with monthly payment, you could pay anywhere between $4000-$8000 in interest alone. That’s a large amount!

New companies are helping those with bad credit

That’s the problem people with bad credit and no credit face on a daily basis. There are limited options for financial help and many of those options take advantage of people who are already in difficult positions and have no other choice.

Thankfully there is a glimmer of hope to all this madness. This is a problem that has received more notice in recent years and new lenders and companies are beginning to enter the market with the intent to disrupt traditionally predatory lending. 

We’ve taken the time to look at some of the pro’s and con’s to some of the kinder, more flexible short-term cash options out there that have been popping up in recent years:

Possible

Possible is a fast and easy alternative for small-dollar loans. Possible does not require good credit and can approve you for up to $500 within minutes. With Possible, you just link your bank account, take a selfie, and after just a couple of prompts, their algorithm will make a decision. Despite not requiring good credit for approval, they do report all repayments to the 3 major credit bureaus (credit reporting) – Experian, TransUnion, and Equifax, allowing you to build credit history. Possible has one of the lowest interest rates currently on the market vs traditional payday loans, averaging around 150-200%. They also have one of the most flexible repayment options available, with the default repayment plan being set for 4 separate payments over the course of 8 weeks. Possible also offers an additional 29-day extension on each payment without any penalty or fees. With such a flexible approach to life’s obstacles, they’re quickly becoming a well-known alternative to short-term loans.

Pros:

• Low interest rates vs traditional options
• No hidden fees
• Insanely flexible repayment options
• Bad credit is ok
• Can help build credit history
• Receive money in minutes

Cons:

• Maximum limit of $500 (this may vary based on the state you live in)
• Currently available in a limited amount of states
• Not everyone is approved

Earnin app

Earnin is a quick and easy cash advance app that allows you to cash out on money and income you’ve already earned, mid-paycheck. With Earnin, you link your bank account and upload your most recent pay stubs and quickly gain access to $100 to cash out and then they automatically withdraw the funds you received on your scheduled payday. Earnin operates without any set interest rates. Each time you cash out your income, they will ask you to consider including a tip. Be careful how much you tip because when it’s converted into an APR, it can be just as expensive if not more expensive than a traditional payday loan. Earnin will usually recommend a tip amount, but you are free to customize the amount as you wish. Earnin also relies on using your phone’s GPS to monitor when you are or are not at work. If the app does not detect that you are at your place of employment, you will not accrue funds to cash out on. 

Pros: 

• No set interest rate – you choose the “tip” you want to pay
• Simple protection to prevent overdraft fees
• No credit check
• Increased borrowing limits upon good repayment history

Cons: 

• Dependent on your work attendance
• Can only cash out $100 per day to start
• You can only extend your repayment for each cash-out one time
• Does not report to credit bureaus

LendUp

LendUp is another alternative to a traditional payday loan, although they are essentially just another online payday lender. LendUp offers single payment loans, cash advance loans, and installment loans between $50-$1000. They don’t necessarily do a hard credit check when applying and make their decisions by connecting to your bank checking account similar to Possible. They also offer an incentive program called the LendUp Ladder. You can gain access to lower interest rates and higher loan limits by making on-time repayments and watching financial educational content that LendUp provides. While LendUp does offer the flexibility of rescheduling and customizing your repayments, their interest rates can be as high as traditional payday lenders and there may be other fees/charges like origination fees and/or instant debit fees.

Pros:

• No hidden fees
• Flexible repayment terms that may come at a cost
• Can build credit history
• LendUp Ladder incentives 

Cons: 

• High-interest rates
• Currently available in limited states
• Not available in an app
• Solves short-term financial needs, not long-term financial health

Last Take

Despite how scary it can be taking out a loan, especially as someone who has poor credit, it is somewhat comforting to know that there are some companies out there trying to create more sustainable options for everyday Americans. Because let’s be real, the people that need the most help are typically the ones presented with the most limited options.

Here at Possible, we want to change that. Possible was founded by people who are experienced in financial hardship and struggle, some even as refugees, and people who have succeeded because they were lucky to receive a helping hand and wholeheartedly believe that kindness should be extended to all Americans. Apply for a Possible loan today and get the money you need in minutes while building long-term financial health.

How an Overdraft Loan or Line of Credit Works

Overdraft loans and overdraft lines of credit are essentially just a form of overdraft coverage or an overdraft protection transfer offered by banks. These forms of “credit” can be expensive and many times, it is best to find ways to avoid overdraft loans and overdraft lines of credit from banks. However, payday loans and other forms of short-term credit may also not be the best solution so understanding what this is, how to avoid it, and what to do will help you make the best decision for you.

Possible recently completed a round of user research in which we debunked a common misconception that users had little to no bank fees and charges, when in fact they were paying hundreds of dollars in fees to banks. While most banks offer free checking and savings accounts (though sometimes requiring a minimum balance),it can be easy to assume that since the account itself is free, there are no fees incurred by the bank account.

Instead, we found that users of Possible are incurring significant fees in their checking and savings accounts, mostly in the form of Non-Sufficient Funds fees (also called Insufficient Funds fee; abbreviated NSF fee) and Overdraft fees. These fees are approximately $35 (though they can vary from bank to bank and account type to account type, $35 seems to be about the average), and can quickly compound into the hundreds of dollars. Tragically, this happens most often when money is tight, often at the end of the month. Here is a chart of overdraft fees, provided by smartasset.com:

Overdraft fees at popular banks (members of FDIC)

1. Bank of America, $35
2. Chase Bank, $34
3. Citibank, $34
4. PNC Bank, $36
5. Santander Bank, $35
6. TD Bank, $35
7. US Bank, $35
8. Wells Fargo, $35

Overdraft and NSF fees are incurred when you spend more money than you have in your bank account, most often in your checking account. For instance, this happens when you attempt to use more money than you have available funds. Some examples are: paying from your debit card, withdrawing money, writing a check, or making an online transfer when you don’t have the money to cover the cost. When you have a checking account overdraft, your bank can choose to cover the extra amount as part of their overdraft policies, even without your consent, including charging and additional fees. Your bank does have a legal requirement to ask you if you want to be covered in the event of an overdraft, and we recommend not opting in. You do not need to authorize overdrafts if you do not want it. This means your transactions are rejected with no cost to you, preventing costly overdraft fees altogether. This may not be realistic for everyone, as sometimes you need the money to cover rent, food, bills, or other essential expenses.

How to Avoid a NSF and Overdraft Fee

If you do decide to opt into an overdraft program, you generally have two options: overdraft coverage or overdraft protection transfer.

Overdraft coverage, also referred to as “courtesy pay” or “overdraft privilege,” is the most expensive option. This allows your bank deposit account current balance to drop below zero, and is essentially an “overdraft loan” or “over draft loan” — your bank “loans” you an amount of money at a flat $35 fee (this still can vary from account to account and bank to bank, but $35 seems fairly standard; see list above) and then requires you to pay it off the next time you deposit into your account, much like a payday loan, except automatic and provided by your bank. If you overdraft just $5 for a week, a $35 fee is the equivalent of a whopping 36,400% APR loan (52 weeks x $35/$5)! Using an installment loan through Possible to cover the difference between your current finances and the amount you need in a given month can lower this APR to as low as 151%, 244 times less than an overdraft fee.

The other common option is overdraft protection transfer which can usually be requested via an opt-in form with your bank. This connects your checking account to another account, like a savings account or a money market account, and sometimes even a personal line of credit so that when you overdraft your checking account and your available balance is below 0, money transfers from your linked account rather than incurring a more expensive fee. These overdraft protections do often incur a $10 to $12 fee (which is cheaper than the $35 overdraft coverage program, but not insignificant), so they’re not a silver bullet for avoiding overdraft and NSF fees. Many of our customers don’t have excess funds in another account, so this is not a good solution for everyone. And even a $10 to $12 fee has an APR in the thousands of percentage points!

The best option for savvy bank account holders and customers is not opting into overdrafting a checking or savings account at all. This will also prevent you from ever having an overdrawn personal checking account or savings account. It will mean that transfers from the affected accounts will not go through – same with purchases on your debit card in line at the store and withdrawals at the ATM. You may even have a returned item or two. While these circumstances can be embarrassing and cause you to not be able to purchase goods or services you need, they are considerably less expensive than the fees you incur from overdrafting or insufficient funds. If you opt to go this route, you’ll need to find an alternative method for obtaining the funds you need to make it between paychecks; it doesn’t help at all with covering unexpected expenses like a car accident or medical emergency. We’ll discuss possible solutions to this problem towards the end of the article. This also requires discipline and focus, to avoid having your debit card declined in the grocery store line.

Another solution is a prepaid debit card. This has the same drawbacks as overdraft protection transfers and not overdrafting at all; in particular, once the balance of the prepaid debit card is out of funds, the debit card is declined wherever you try to use it. For customers who have insufficient funds to make it between paydays, this may not be a viable option. You may choose to combine this with other types of loans to help you regulate your spending; for instance, a payday loan or an alternative payday loan from Possible can be a strong financial choice to avoid the high APR of overdraft fees. This can help regulate spending throughout the month, help make ends meet when money is tight, and make it impossible to overdraft. In addition, by building credit history, you’ll be improving your long-term financial health.

Getting an overdraft loan or line of credit

Overdrafting from a personal line of credit, however, is a different choice that can work better for some customers, especially those with better credit scores. Connecting a personal line of credit to an overdraft protection transfer can also be called a bounce loan. A personal line of credit is type of loan, since the bank gives you money with an interest rate and expects you to pay it back, and similar to a bank account, you draw funds from it as you need. Interest rates are often 7.25% to 20% with a nominal annual fee – for example $25 at Wells Fargo or free with one of our local credit unions, BECU (our office is in Seattle, WA).

Personal lines of credit are often a better and cheaper solution than payday loans and can help build credit by reducing credit utilization if used sparingly in emergencies. Unfortunately, this means that personal lines of credit help people who do not need credit as much as others who can’t qualify. Personal lines of credit usually require a hard credit check, and some people may not have the credit to qualify — for instance, Citibank and Wells Fargo require a credit score of 690 or higher. Oftentimes, the people who need money fast to cover important bills are the people who have the least (or no) credit, but be sure to check with your local credit union, who may extend personal lines of credit to people with bad credit (as low as 300). Getting a loan from Possible can help build credit history by offering loans that are paid off in multiple payments that are automatically deducted from your bank account painlessly on paydays over a few months. We hope that users will “graduate” to higher credit score and cheaper APR (annual percentage rate) solutions for managing their money, like personal lines of credit.

This solution is a strong compromise between expensive fees and getting money when you need it most. Most of our customers in our survey said that they use pen and paper to track their finances. This is time-consuming and error-prone, which can lead to mistakes or oversights from doing your finances too late for fees. Overdrafting from a personal line of credit will charge you less money than an overdraft fee, while giving you the safety of not bouncing checks or getting your debit card purchases declined at the mechanic with bad brakes. If you have the foresight to discover that your bank account is running low before you actually spend the money you don’t have, you can even avoid the extra $10-$12 fee altogether, since the fee is for automatically moving money from one account to another, rather than using the account.

Alternative options such as payday loans

If you don’t have enough money to make ends meet, and you don’t have to credit to qualify for a personal line of credit, you may also consider a traditional payday loan or a no credit check loan. Traditional payday loans can be very expensive, as high as 16,734,500.4% APR, but typically around 400%. They are paid in a single lump sum, usually in the next 2-4 weeks. These loans are reported differently than other loans, and sometimes require a hard credit check which can lower your credit score in the short term. A hard credit check is one that is initiated by yourself and that is made when an institution decides to make a decision about whether to lend to you, whereas soft credit checks are made for things like Credit Karma to help you monitor your credit, or pre-approved credit card offers.

Another way to get funds is through a HELOC, a home equity line of credit. Home equity lines of credit are a way to get value out of your house and into your pocket. Much like a mortgage, you offer your house as collateral, meaning that you promise that if you don’t pay, you’ll forfeit your house to cover the cost. This secured loan allows you to access the equity, or the difference between the remaining principal on your house, and the value of the house. More simply, if your house is worth $100,000 and you still have to pay $20,000 in principal (not to be confused with the total amount you still owe, principal is the remaining balance of the loan minus the interest), then you might be able to get up to $80,000 from a HELOC, depending on your lender. This is not a very realistic option for many of our customers, who are renters or don’t have a lot of home equity. But if you have this option, it can help bolster your personal checking accounts and savings accounts.

Another option is applying for a personal loan. Personal loans are “unsecured,” meaning that they do not require collateral. Other loans, like mortgages, car loans, title loans, or HELOCs, require that the bank has some asset that they can repossess in case the balance of the loan is not paid, called collateral. An asset may be something like a house, in the case of a mortgage or HELOC, or a car in the case of a car loan. This collateral makes the loan less risky for the bank, and therefore lowers the cost of the loan to the customer. Personal loans can range from 6%-36% APR and are often paid off over 2 to 5 years. These loans, however, are usually offered to customers with credit scores of 600 or higher. You’ll need to apply for credit. Using solutions like Possible can help you build your credit high enough to qualify for higher credit score and cheaper APR solutions, like personal loans. Derrick B. says about Possible that his “credit has climbed up faster than [he] ever thought it would. Went from upper 300’s to now 588-612 range and still climbing.” Experiences  like this unlock the ability for our customers to access a broader range of financial products.

Carrying a credit card balance is a choice that some customers make. Credit card APRs can run around 26% for people with bad to fair credit (between 300 and 670) but most credit card companies do not lend to anyone with a credit score under 600. In addition, you’ll likely need to be in good standing on your outstanding debt. Carrying a credit card balance increases your credit utilization ratio, which will hurt your credit. Your credit utilization ratio is the ratio of the amount of credit you have to the balance you are carrying. The higher the ratio, the closer you are to maxing out your credit cards, and will hurt your FICO® score. Using Possible Finance, however, will help to build your credit by providing an installment loan, which, when paid off on time will ideally increase your credit score.

So now what?

The financial landscape is bewildering, and can be difficult to navigate for many customers, even savvy customers who have been working with financial institutions for a long time. If you ever need to verify a specific financial institution, you can use NMLS Consumer Access to do so. Next steps for you are to go to your bank and find out if you can get a personal line of credit and turn off overdrafting altogether. If you can secure both, then you have a surefire, inexpensive way to handle unexpected expenses. And if you don’t qualify for a personal line of credit, then we would invite you to consider using Possible with a prepaid debit card to avoid overdraft and NSF fees.

3 Month Payday Loans

We understand emergency expenses may come up and you need to stay on track with your bills. You’re considering different payday lenders because you need to borrow money until your next paycheck. Payday loan lenders have a negative reputation but we guarantee that better alternatives exist and some have your best interest in mind. At Possible, we believe every American should have access to financial services and assistance. If you’re not familiar with how payday loans work, we want to provide you with resources so you can make the best financial decision for yourself. 

What’s a 3-Month Payday Loan?

Payday loans, also known as cash advances, are short-term, low-balance, high-interest loans intended to hold you over until your next payday – this is where the name comes from. It’s meant to be a form of easy cash, albeit having a higher APR (annual percentage rate) than personal loans, credit cards, and other high credit score products. Usually, payday loans and short term loans have a loan term of less than 3 months because these unsecured loans are meant to be paid back in a very short period of time. There are many loan options to choose from and receive fast cash. You may not even need to leave your living room to apply for a loan – there are in-store and online payday loan applications available. Take some time to research what’s available in your state. Ideally, it’d be great if you had a friend or family member that could help lend you money to cover your emergency expenses, but this is not possible for everyone. Fortunately, you’re not alone because many households have taken out a payday loan.

The Pew Charitable Trust estimates that 12 million Americans take out a payday loan each year. Payday loans are advertised to help with unexpected, emergency expenses by the borrower but the study found 7 out of 10 borrowers use the money for regular, recurring expenses such as rent or utilities. The Consumer Financial Protection Bureau (CFPB) became concerned about people getting trapped in a cycle of debt so they’ve issued regulations on payday loans such as the number of loans a borrower can receive. “For millions of Americans living paycheck to paycheck, seeking out a loan in a time of need shouldn’t end in financial disaster. The rule is an important step that starts the process of ending the nightmare of spiraling debt for so many consumers,” says Michael Best, director of advocacy outreach at Consumer Federation of America.

What’s the Maximum Amount You Can Borrow From a 3m Payday Loan Lender?

The loan amounts are small and many states limit the size of a payday loan. The most common loan limit is $500 although the limits may range above or below this amount. Your payment will typically be due in one payment on your next payday or when you receive another income source such a pension or Social Security. This is a difficult option because you’ll be paying back the loan and the finance charge in a short period of time. Many borrowers end up paying more in fees than they actually received in credit. Both offline and online payday lenders have access to your bank account to ensure that they’re able to collect from your paycheck before other bills are due. If the payment isn’t paid in full on the first payday, a new finance charge is added and the debt cycle continues. A debt cycle is when a person cannot pay back their debt and continuously borrows or extends out their debt to prolong paying it back. Be careful to not get yourself in a debt cycle. There are payday loan and cash advance options where you can make installment payments instead. 

What’s an Installment Loan?

You may have heard about a three-month payday loan option which is more like an installment loan. A three-month payday loan would provide a three-month loan term for you to make installment payments. If you’re searching for online loan lenders, you’ll find that lenders like Possible will market the loans as “installment loans.” There are many types of installment loans – in fact, mortgage (for real estate or homes) and car loans (for vehicles) can be counted as installment loans because you repay back a portion of your loan in fixed amounts spread out over time. However, most states have laws in place that won’t allow you to take out a three-month payday loan because there’s a limit on how long a payday loan can be active. Some lenders will roll over your loan payment to go around the term limitations. A loan rollover is when you pay the interest and fees on your loan’s due date. The lender allows you to hold onto your original principal and issues your loan new terms and due dates. Trying out an installment loan allows you to make smaller payments instead of a lump sum on your next payday. The benefit of an installment loan is the payments due are predictable and makes it easier for you to budget your loan payment each month. Possible is a payday loan alternative and will allow you to make your payments in smaller, more affordable installments. 

Will You Be Able to Borrow More?

A potential drawback for installment loans is you can’t borrow more than you were originally approved for and you can’t borrow more when you have amounts outstanding with your lender. In order to receive more money, you will need to pay off your current loan and then reapply for a higher amount. Possible includes a loan amount selection feature in the mobile app to let us know how much you’d like to apply for. This amount isn’t guaranteed but it gives us a target of how much you’d like to borrow. 

What is the APR and How is it Calculated?

It’s not uncommon for the annual percentage rates (APR) to exceed 500% or even 1000%. The annual percentage rate is calculated by ((principal * 365) / term) * 100. The average APR for a payday loan or cash advance is 391%. State regulations will determine how much a brick and mortar or online payday lender can lend and how much interest they can charge. With Possible, we offer consumer-friendly borrowing fees between 150 and 200%. The fee will vary state by state so we recommend downloading the app to find out how much the specific borrowing fee will be. 

Do You Qualify for a Payday Loan?

Make sure you do some research and see what loan options are available in your state. There are limited borrower qualifications to receive instant cash. Most payday lenders require borrowers to have a valid ID, an active bank account, and proof of income. Be sure to use reputable lenders who will protect your information, are not susceptible to hack, and abide by federal and state law. Employees at payday lenders will also have access to your information so go with a lender you trust.

Your ability to repay the loan is often not considered in the loan application process. Be careful not to get into a debt cycle. You’ll need to understand your finances by knowing how much income you’re bringing in and where all the money goes. Many borrowers can’t afford the loan payments and end up paying late fees to delay their payment date or refinancing the debt until they end up paying more than the original loan amount. The CFPB found that 80% of payday loans are taken out by borrowers within two weeks of repayment of a previous loan. At Possible, we want to help alleviate financial stress for our customers by never charging a late fee. We understand financial hardships happen and want to assist you during those times. 

Do You Qualify for a Loan With Possible?

Our online and mobile loan platform requires an ID, SSN number to verify your identity, and an active checking or savings account that received at least three months’ worth of income. Possible has both an iOS and Android app and you can download the Possible app on the respective app store. Even though we like to see at least three months’ worth of income, we may be able to work with you if you opened up a new bank account and have at least a month’s worth of income. We recommend you make a minimum of $750/month, have a positive bank balance – the higher the balance, the better – and no recent overdraft fees. The loan decision is based on a variety of factors based on your bank data. We do our best to not over-lend to customers, which makes it hard to repay and causes overdraft fees. Due to state regulations, today, we’re only available to Washington state, Idaho, Utah, Texas, Ohio, and Florida residents at the moment. It takes time to expand into a new state but we’re working on it. If you select a state we don’t service, we will put you on the waitlist to get notified once we are available in that state. Please contact our customer service at [email protected] if you have any questions about the process.

How Do Installment Loans Work?

Once you’re approved for a loan and accept your loan agreement, you are given the option to make smaller installments. Most payday loan lenders can provide you with instant cash, but the payment is due in a lump sum, making it difficult to pay back. We understand life happens and if you’re not able to make a payment on the scheduled date, the app provides a 29 day grace period for you to update your payment dates and make a repayment within your grace period. 

What Happens if You Can’t Pay On Time?

Any payments that are past the 29 day grace period is considered late to the credit bureaus. Possible is bound by federal law to report accurate information to the credit bureaus and we won’t be able to amend late payments. The late payment will negatively impact your credit score until it’s paid off. We encouraged to pay off your cash loan on the originally scheduled date, even if your cash flow is getting a bit stretched. In addition, outstanding payday loan debts can can limit you from further borrowing from payday lenders depending on what credit checks lenders use and regulations within your state. In states like Texas, there have even been payday lenders and financial institutions who file criminal charges for a breach of contract or fraud against those who can’t pay back. If this happens to you, please contact legal counsel or attorneys in your area to understand the law the get the right advice for your situation.

Does Your Credit Score Determine Your Eligibility? 

You may be worried about not qualifying for a loan because you have a poor credit score. Luckily, having a good credit score isn’t required for payday lending and especially for companies like Possible. During the application process, Possible will perform a “soft pull” on your credit score for fraud prevention and identity verification. Soft pulls will not impact your credit score and we do not base our loan decision on your credit score. In addition, check out other loans that don’t require a credit check.

Do Payday Loans Help Build Credit?

Most payday and short term loan lenders do not report to the credit bureaus so it won’t help you build credit. Possible reports to all the major credit bureaus including Experian, TransUnion, and Equifax. We report the status of all loans at the beginning of the month for payments made the previous month. This is done on purpose to give you a chance to catch up in case you missed a payment. Each credit bureau will process our reports at different times so you may not see changes to your credit report immediately. 

The best way to build your credit score is to make sure your payments are made on time. This applies to payday loans, student loans, credit card payments, auto loans, and rent. You can also look into credit-builder loans to understand whether that’s a fit for you.

What Happens If You Default on a Payday Loan

In 2019, more than 12 million Americans will turn to a payday lender for cash. This is usually in the form of a cash advance or payday loan. Most people have every intention of paying back the loan in full and on-time. However, as we all know, life happens – you have an unexpected expense, you lose your job, and your upcoming debt payment slips your mind. Whatever the reason, something prevents you from being able to pay off your small loans when you intended. Before you know it, the loan enters a scary sounding state, like Default, or Collections, and you start receiving ominous messages from the payday loan lender or a collections agency. It can all feel very overwhelming!

If you find yourself in this situation, don’t panic! Take comfort in knowing that you’re not alone in this – it’s estimated 71 million Americans have at least one debt in collections. This article will break down what happens when a brick and mortar or online payday loan goes into Late, Default, or Collections, and give you strategies to best manage the situation.

Need a refresher on payday loans? This overview of payday loans will help you get an in-depth understanding.

Terminology for Payday Loan Statuses

First things first, let’s get some terminology out of the way. Most lenders like a bank, credit union, or Possible use similar words to describe different statuses or states of a loan, whether it is a personal loan, short-term loan, payday loan, student loan, credit card, or something else. When managing your loan, it’s helpful to have a sound understanding of these terms and what they might mean for you: 

• Current – Yay! This is the best loan state to be in. Your payments are up-to-date and you do not have any outstanding payments. All payments will be reported to the credit bureaus as paid on-time. In an ideal world, you’d always be in a Current status.
• Late – One or more of your loan payments are past due by at least 15 days. Some lenders may break this down even further by splitting out Late statuses into something like: Late (16-30) or Late (31-45). Either way, the best way to think of Late is that you’re slightly behind on your payments. Depending on the loan, you may experience some additional late fees and be at risk for negative impacts to your credit. The good news with a Late status is that you can often catch back up to a ‘Current’ status and finish the loan term with a paid-on-time status.
• Default – Payment(s) have been outstanding for an extended period of time. The amount of time depends on the lender but is typically at least 60 days late. At Possible, we consider a payment in Default if it has been 60 days late from the original payment date. When a loan enters a Default state, the customer is likely to experience negative consequences in terms of increased fees and/or negative impacts to their credit. In some states, like the state of Washington, lenders are required to report any customer in Default to a state database. As a result, this will prevent customers from obtaining new payday loans as other lenders, by law, cannot offer the customer a new loan until the original loan has been paid in full.
• Charged-off – While technically an accounting term, you may come across this term if you fail to pay off your loan. A loan moves to a charged-off state when there is a reasonable expectation that the loan will not be paid in full. The loan originator is accounting for this expectation by marking the loan as a loss in their accounting records. This typically happens right before a loan is sent to Collections. When a loan enters a charged-off state, the customer is likely to experience even more negative impacts to their credit score.
• Collections – At this point, the loan originator no longer thinks they can recover any money from the loan and sells the loan to a 3rd-party collections company to collect immediate cash. The collections agency will takeover all communications with the customer regarding the loan. The primary goal for the collections agency is to get the customer to pay something, even if it’s a really small percentage of the amount outstanding. In the industry, this is called “Settling.” Please note – if you settle, the loan will be reported to credit bureaus as ‘Settled.’ This status still carries negative consequences since the loan was never repaid in full.
• ‘Closed’ or Paid-off – Often used interchangeably, closed/paid-off mean roughly the same thing — your loan has been fully paid and there are no outstanding payments. Expiran does a good job breaking down the definition here. 

What to Expect When You Can’t Repay a Payday Loan

Now that we understand some of the basic terminology, let’s walk through what you can expect if you find yourself not being able to repay a payday loan.

Inbound messages increasing in severity over time

No surprise here – one of the very first things you can expect is a message from the lender in which you took out the pay day loan. Normally, immediately upon failure of the first payment, the payday lender will send you a message letting you know that the payment(s) weren’t successful. These messages will include instructions on what to do next and how to make a payment. The expectation here is that you, as the customer, take some sort of action on the loan like making the payment successfully. If you don’t, it’s likely these messages will increase in frequency and severity. These messages will mimic the loan statuses mentioned above (Late > Default > Charged-off > Collections). Because you likely signed an Electronic Communication Agreement when you took out the loan, you can expect the lender to reach out to you through a variety of communication channels: email, SMS, voice, push notifications, and/or physical mail. These messages can feel extremely overwhelming. The main thing lenders are looking for is some sort of engagement from you. We recommend engaging with the lender and communicating your plan to repay the loan as soon as possible. Even if you cannot repay the payment in full immediately, working proactively with the lender may result in more flexibility, less stress, and a better end result.

Handoff to collections

If you don’t take action on the loan, it’s highly likely that you will be handed off to a 3rd-party collections agency. Typically, the original lender will send one last email requesting payment before letting you know that your loan has been passed off to a collections agency. Once given to a collections agency, you can expect a barrage of messages from them. Most of these agencies have advanced, automated messaging systems that send messages following a certain set of logic. As mentioned above, their primary objective at this point is to get you to pay at least some portion of the loan. The good news: you will likely be able to negotiate the cash settlement amount to a fraction of what is owed on the loan. The bad news: if you settle, this status might be reported to credit bureaus. This is because settling means you did not pay back the full amount of the loan. This will not only hurt your credit score but may also impact your ability to take out a loan in the future. 

At this point, we recommend engaging with the collections agency and making an offer to settle. It’s in their best interest to settle, so you might be able to pay off the loan at a fraction of the original cost.

Impacts of not paying back a payday loan

By definition, there is little legal recourse a payday lender can take in recovering payments from a payday loan. These loans are, by definition, unsecured. That being said, there are negative consequences you should be aware of: 

• Credit – Many payday lenders are now reporting the status of payday loans to credit bureaus. For most customers, this is seen as a huge benefit as it helps people establish and build credit such as through the Possible loan; however, if you’re unable to make repayments on a payday loan, you can expect to experience negative impacts to your credit. These negative consequences will only increase the longer you wait to pay back and next time a lender runs a credit check, you might be unpleasantly surprised at the drop in your credit score.
• Extra fees/interest – Depending on the lender and the state in which you live, you may be at risk to increased fees and interest if you’re unable to repay your loan. These extra fees often come in the form of non-sufficient funds (NSF) fees that the lender is able to charge as a result of an unsuccessful payment. Additionally, some states allow lenders to charge extra interest on outstanding payments, which means the interest on your payments will increase the longer you wait to make a repayment.
• Harder to obtain loans in the future – Not repaying your loan may impact your ability to obtain short-term financing in the future. Payday lenders have a couple ways to see if you’ve paid payday loans in the past, specifically: credit report checks (even soft pulls!) and bank transaction data analysis. If you want to keep open the possibility of receiving a payday loan in the future, it’s helpful to pay off your loans. Because once you default on a loan, your short-term lending and short-term credit options will likely be limited in the future. It may even impact whether you can get a checking account, credit card, or debit card in the future.
• Ongoing stress and anxiety – Carrying around debt can lead many people to feel increased levels of stress and anxiety. In fact, there is a name for it: debt-stress syndrome. It’s easy to ignore this impact, but for many people, it’s a very real consequence of not paying back a payday loan. If you find yourself feeling increased levels of stress or anxiety due to your financial situation, you can contact a professional or doctor for help. In addition, there are non-profit credit counseling options available if you do the research.
• Texas lenders turn to criminal prosecution – While not common in most states, in Texas some payday lenders are turning to the courts to criminally prosecute customers “by using the state’s bad check and theft by check laws and arguing that delinquent borrowers are committing fraud or theft.”

Strategies to manage the debt situation

Regardless of how dire the situation may seem, you’ve got options. In the section below, we’ll focus on strategies to best manage payday lending debt. If you’re looking for generic advice regarding debt management, we recommend checking out this NerdWallet article (it’s one of our favorites!): How to Get Out of Debt – 7 Tips That Work. 

Understand the cost of all debt and pay the most expensive first. If you find yourself in a situation where you cannot repay a payday loan, it’s likely that you may have some other debt you need to address. We recommend going through all of your outstanding debt and identifying the following information: fees and interest, finance charge, amount outstanding, and due dates. From here, there are two schools of thought: quick wins by paying off small debt vs. long-term approach of paying highest interest first from the extra you have available in your bank checking account. There are also payday loan consolidation products out there, usually in the form of personal loans. Be sure to calculate the annual percentage rate (APR) on your debt to compare things on an apples-to-apples basis. Here at Possible we believe people should optimize for long-term financial wellness, and thus, should first focus on loans with the highest fees & interest. 

Ask your lender for an extended repayment plan – Most lenders and financial institutions are governed by state regulations when it comes to repayment plans. Depending on the state in which you live, you may be entitled to an extended repayment plan. These plans often allow customers to pay back the loan over an extended period of time, with no additional fees or interest, and may even allow you to split up payments. For instance, in the state of Idaho the extended repayment plans “must provide for at least four (4) equal payments over a time period of not less than sixty (60) days.” To find out if you’re entitled to an extended repayment plan, contact your lender or visit your state’s online department of financial regulation. 

See if the lender allows for a grace period – Some lenders, in addition to extended repayment plans, may offer what’s known as a “Grace Period.” These grace periods give customers additional flexibility with regards to the exact timing of when money will be withdrawn from their account. While the underlying payment dates on the loan contract may not change, the date of the Automatic Clearing House (ACH) instructions (i.e. the date the money will be withdrawn from your account) can be changed through changing the “Grace Period.” In addition to giving yourself some more time to repay, you should not incur additional loan fees or negative consequences to your credit score by taking advantage of a grace period. To find out more, contact your lender to see if they offer grace periods. 

Evaluate whether a rollover is worth it – In some states, you’re able to refinance your amount outstanding with a new loan. However, we do not recommend this approach as it can often lead a borrower into further debt and potentially send people into a debt spiral. This approach should be used sparingly and only if you are certain that you can repay both the original loan and the rollover loan. Here at Possible we believe that rollovers often trap a borrower in a bad debt cycle. As such, we do not offer rollovers in any state in which we operate. 

Settle with a collections agency for a fraction of the cost – If you find yourself in a situation where you simply cannot make a repayment, there is a high likelihood that your loan will wind up with a collections agency. If this happens to you, it’s important to know that you can negotiate with these collections agencies. Their primary objective is to receive some money from you. So make an offer and see if they take it!

Save and make a monthly payment – Perhaps the best thing you can do is budget, save, and make a payment. This debt will likely not go away anytime soon. The best thing you can do is to come up with a game plan for how you can save enough to make a payment on the outstanding balance. 

NOTE: Beware of abusive collection practices – We have heard from a lot of our customers about abusive practices related to collection agencies. Please note – all collection agencies must follow a very specific set of laws and regulations in order to collect funds. Below are some of the most common abuse practices used by collection agencies: 

• Abusing communication laws and guidelines by contacting customers outside of approved hours and/or sending multiple communications in a single day
• Making unsubstantiated threats in the form of increased costs and/or other punitive actions

If you’d like more information about debt collection laws in your state, please check out your state’s consumer protection site.

How does Possible think about this defaulting and collections

To best understand how we think about fund recovery and collections at Possible, a payday loan alternative, it’s helpful to first understand our Core Values: Empower with Trust, Serve with Empathy, and Succeed with Grit. All of these values play a crucial role in how we think about collections and fund recovery at Possible. Like the Core Values article mentions, we not only trust each other but we hope to build deep and lasting trust with our customers. This trust goes both ways. Our customers place a lot of trust in us; we place a lot of trust in them. This core tenant of trust is at the center of how we think about fund recovery and collections. 

First, we trust that the vast majority of people who take out a loan with us have a genuine intention of repaying that loan. This is core to how we approach fund recovery. An example of this is with our messaging to customers who have failed a payment or enter a late/default state. We strive to make our messaging to customers reflect that trust. 

Secondly, as it relates to ‘Serve with Empathy’ we’re working to build an approach to fund recovery that puts us in our customers’ shoes. We do this in a couple ways:

1. We only re-attempt failed payments if we have high certainty that the customer has enough income to cover the payment. This is because we try to put ourselves in the shoes of a customer. We know overdrafts are a very real thing and we don’t want to be the cause of an overdraft for our customers. 
2. We try to give customers ample warning if we do re-attempt a failed payment. This gives the customer time to let us know if the upcoming attempt needs to be adjusted. 

These two things are not required by law, but what we’ve determined here at Possible are the right things to do. 

If you are a current customer and think we can do a better job when it comes to managing customer who cannot repay their loan, please let us know. We welcome the feedback to improve the process and make it better for customers. If you’re looking to apply for a Possible loan, download the Possible app and borrow money today!