If you find yourself in a situation where you need money fast, you may wonder about your options. Direct deposit loans are available on short notice, allowing you to have money deposited into your bank account quickly.
While direct deposit loans have some benefits, they also have some serious disadvantages, including their high fees, exorbitant interest rates, and too-short repayment terms.
A direct deposit loan is a type of online payday loan that is deposited into your bank account shortly after approval. Direct deposit loans are generally small, short-term loans, often with sky-high interest rates.
Payday loans have historically been available at physical storefronts. But they’re now available online, just like many other types of loans. Online lenders help provide quick and convenient access to funds.
It’s worth noting that direct deposit loans aren’t the only type of loan that can be deposited directly into your bank account. But this guide specifically refers to payday loans that are eligible for direct deposit.
A direct deposit loan is a type of payday loan, meaning it’s a short-term loan for a small amount — usually $500 or less, but as high as $1,000 depending on the laws in your state . These loans get their name because they’re intended to be repaid with your next paycheck.
The funds from a direct deposit loan can be immediately deposited into your bank account as soon as your application has been approved.
Like other types of loans, direct deposit loans charge interest. That interest often comes in the form of fees, and it amounts to a rate that’s considerably higher than other loans. According to the Consumer Finance Protection Bureau, it’s not uncommon for payday loans to have rates of $15 per $100, which equates to nearly 400%.
Because of their short terms, low amounts, and high fees, direct deposit loans generally don’t have strict eligibility requirements. Requirements usually include being 18 years old and having a bank account and proof of recurring income.
Due to the unfavorable terms these loans have, they’re designed for a specific type of borrower. Payday loans may be one of the only options available to someone with a poor credit history or a low income that doesn’t allow them to qualify for a traditional personal loan.
As with any financial product, direct deposit loans have benefits and drawbacks. Here are some pros and cons of direct deposit loans to consider:
Most personal loans have minimum credit score requirements, which means they aren’t always accessible to those with poor credit. Direct deposit loans and other payday loans are available even if you have bad credit. In fact, that’s exactly the type of borrower these loans target.
Unfortunately, the accessibility of direct deposit loans comes at a cost, in the form of high fees and rates. These predatory loans trap borrowers with bad credit into a payday loan cycle, since they often need an additional loan to afford the fees on the initial loan.
While a direct deposit loan may often seem like the only option, that might not be the case. A personal loan, like a direct deposit loan, can be deposited into your bank account soon after approval.
Related: Learn more about getting a personal loan on Credible.com
The key differences between these two types of loans are interest rates and eligibility requirements:
Here are Credible’s partner personal loan lenders that offer loans that can be directly deposited into your bank account:
Avant offers personal loans to borrowers with credit scores as low as 550. Loan amounts range from $2,000 to $35,000 and can be funded as soon as the next business day.
Axos offers large personal loans ranging from $10,000 to $50,000. While the lender offers competitive interest rates, you or your cosigner will need a credit score of at least 700 to qualify.
Best Egg is another lender that offers personal loans to borrowers with below-average credit. You can qualify with a credit score of at least 600 and can borrow between $2,000 and $50,000.
Discover is an online lender that offers loan terms up to seven years, which can help you fit your monthly payment comfortably into your budget (at the cost of accruing interest over time). You can borrow between $2,500 and $35,000 and need a minimum 660 credit score to qualify.
LendingPoint specifically lends to borrowers with near-prime credit, meaning scores ranging from the upper 500s to the 600s. Loans are available in amounts from $2,000 to $36,500, and you can get your money as soon as the next business day.
LightStream offers loans ranging from $5,000 to as high as $100,000 (depending on your borrowing purpose). You can get your funds as soon as the same day you’re approved, and you’ll need a credit score of at least 660 to qualify.
OneMain Financial doesn’t have a minimum required credit score, which means you may be able to qualify for a loan even if you have low or no credit. You can borrow $1,500 to $20,000 with repayment terms from two to five years. Keep in mind that the lender may require collateral to qualify for a secured loan, if you don’t have the credit for an unsecured loan.
Prosper is a peer-to-peer lending platform, meaning its personal loans are funded by investors who make money when you repay your loan. Prosper offers competitive interest rates on loan amounts up to $50,000, but you’ll need a credit score of at least 640 to qualify.
If you borrow from Universal Credit, you’ll get access to credit-building tools, such as free credit monitoring and personalized loan recommendations. Minimum credit requirements start at 560, and you can borrow $1,000 to $50,000 with repayment terms from three to five years.
Upgrade is known for its fast loan funding, as it’s often able to provide loan funds within a day of clearing necessary verifications. You can borrow up to $50,000 with a credit score as low as 560.
Upstart offers personal loans to borrowers with little to no credit history, and considers other factors such as your education and job history when deciding if you qualify for a loan. Loan amounts range from $1,000 to $50,000 with repayment terms from three to five years.
Most personal loan lenders are able to provide your loan funds via direct deposit. If you’re borrowing to consolidate existing debt, some lenders offer to pay off your creditors directly, saving you a step.
To qualify, you’ll have to meet the minimum eligibility requirements set by the lender, including a minimum credit score, minimum income, and a maximum debt-to-income (DTI) ratio.
Your DTI ratio is the amount of your monthly income that goes toward paying off existing debt. This number gives lenders an idea of your ability to manage and repay your debt responsibly.
DTI ratio requirements can vary by lender, but a 40% or lower DTI gives you better odds of approval. You can lower your DTI by paying down existing debts, or by getting a personal loan to consolidate all of your bills into one fixed-rate loan with a single monthly payment.
Before you can receive your loan, you’ll have to submit an application, provide identification, and submit financial documents such as recent pay stubs or tax returns. The lender will also perform a hard credit check, which can temporarily reduce your credit score by a few points.
| Tip: Before formally applying, prequalify with multiple lenders to confirm your eligibility and check potential rates and terms. That way, you can shop around without suffering the hard credit check and committing to any one lender. |
Qualifying for a personal loan online is a quick and simple process. To get a personal loan, follow these four steps:
- Check your credit. Before you apply for a personal loan, it’s a good idea to know where your credit stands. You can check your credit report for free with AnnualCreditReport.com. Check your reports for any errors, such as incorrect late payments or charge-offs and dispute them with the appropriate credit bureau to potentially boost your score.
If your credit is less than ideal, consider applying with a cosigner (or co-borrower) with good credit to increase your chances of getting approved. Just keep in mind that if you’re unable to keep up with payments, your co-applicant will be responsible for repaying your loan. - Shop around. Interest rates, loan amounts, and eligibility requirements vary among lenders. Shopping around can help you find the best loan for your unique financial situation.
- Submit an application. Personal loans usually require a short application that includes your personal information, employment and income information, and your Social Security number. During the application process, the lender will run a hard credit check and verify your income.
- Receive your money. Many online personal loan lenders can provide loan funds as soon as the next business day. Like direct deposit loans, the money is usually deposited directly into your bank account.
One of the most attractive features of direct deposit loans is the ability to have the money deposited into your bank account quickly. In some cases, the deposit may be made immediately or the same day, and in other cases it may take up to one business day.
Direct deposit loans are generally only available if you have a bank account to deposit the funds into — but that doesn’t mean you can’t get one. Some personal loan and payday loan lenders can provide your loan funds via cash or check.
Related: Learn more about getting a personal loan on Credible.com