Nearly one in three U.S. consumers can’t cover a $400 unexpected expense with cash, according to a 2022 report from the Federal Reserve. If you don’t have emergency funds set aside for unplanned expenses, taking out so-called same-day loans may seem tempting. 

Same-day loans are a category of financing that can include riskier, sometimes predatory products like payday loans and pawn shop loans. These sorts of same-day loans could provide quick cash and may be easier to get, but they likely also come with high interest rates and could cause you to be mired in a cycle of debt.

Other sorts of same-day loans, such as personal loans from reputable lenders, could be a safer borrowing option — though it’s unlikely you’d be able to complete the application process and receive funds on the same business day.

Before you pursue the fastest route to borrowing, consider the basics of same-day loans, including their requirements, pros and cons, and alternative options. 

Same-day loans are short-term loans (sometimes called emergency loans) intended to help you bridge the gap between paydays and receive cash as soon as the same day. 

However, same-day loans could lead you into a debt trap since they’re typically much more expensive than other forms of borrowing. Some same-day loan lenders charge borrowers up to 400% annual percentage rate (APR) — nearly 40 times the average APR of personal loans as of November 2022, which is 11.23%, according to Federal Reserve data. 

Here are four different types of same-day loans and how they work:

1. Payday loans: Same-day payday loans are short-term loans for small amounts of money — generally less than $500. Payday loan lenders typically charge $15 per $100 for a two-week payday loan, which translates to an APR of almost 400%. These expensive short-term loans can get you stuck in a cycle of debt, so it’s best to exhaust all other options. 
2. Title loans: A title loan uses your car as collateral, which means you could lose the vehicle if you default on the loan. Most title loan lenders allow you to borrow up to 50% of the car’s value, but they typically charge a monthly finance fee of 25%, which translates to a whopping 300% APR. This is another form of financing to avoid, if possible.
3. Pawn shop loans: For this same-day loan, you visit a pawnshop, provide an item as collateral — such as jewelry, a used phone, or a musical instrument — and they’ll offer you a loan based on the item’s appraised value. The average amount of a pawnshop loan is $150, with a repayment term of 30 days, according to 2020 data from the National Pawnbrokers Association. Rates, fees, and rules vary by shop, so it’s best to proceed cautiously.
4. Credit card cash advance: A credit card cash advance is a short-term loan offered by your credit card issuer. It allows you to borrow cash against your credit card’s line of credit through an ATM or at a bank’s teller window. As we know, credit card APRs are high, however, so not being able to repay the advance before interest accrues could cause serious strain on your budget.

Receiving loan funds on the same day may seem ideal — but not at the cost of having to repay the debt on a short term, at a high APR, and with predatory fees.

That’s why most consumers are better off considering personal loans if borrowing becomes a necessity. Online lenders typically fund personal loans in one to five business days after you’re approved, while banks and credit unions usually disburse the balance within one to seven working days.

With personal loans, you can typically apply online or in-person (in the case of banks and credit unions). You can also prequalify to confirm your eligibility and potential loan details without affecting your credit.

Personal loans are also a better option than predatory same-day loans because they feature…

Now you know that there are fast personal loans, while not exactly same-day loans per se.

Related: Learn more about getting a personal loan on Credible.com

Many of the above lenders fund personal loans within one business day of being approved. If you go this route, it’s wise to prequalify with multiple lenders to determine which offers the best APR, loan term, and other details for your financial situation.

If, on the other hand, you decide to go with typical same-day loan options, remember that predatory lending is rampant in the industry. Here are some tips on choosing a same-day loan lender to avoid falling victim to a bad loan with a bad lender.

Follow these steps to apply for a same-day loan:

1. Shop around and compare lenders. Don’t opt for the first same-day loan you lay your eyes on. Consider as many lenders as possible to find the best loan for your needs. If you opt for a traditional personal loan that’s funded in one to seven days after approval, prioritize lenders that offer prequalification without a hard credit check that can temporarily ding your credit score.
2. Fill out the application. Once you’ve selected a lender to work with, complete the formal application and submit any required documents. In the case of fast-funded personal loans, you could strengthen your application by applying with a creditworthy cosigner. Just remember that the cosigner will be equally obligated to repay the loan if you can’t, so their credit would be on the line.
3. Accept your loan. After you’re approved, review your loan offer in detail so there aren’t any unpleasant surprises down the road. If you agree with the terms, accept the loan offer to receive your funds. 
4. Receive the funds. Most lenders allow you to receive funds by direct deposit once you provide your bank account information. In the case of debt consolidation loans, some lenders offer to pay your current creditors directly.

Related: Learn more about getting a personal loan on Credible.com

The requirements for a same-day loan might vary from lender to lender, but you typically need to meet these criteria to be eligible:

Be sure to read any documentation requests from the lender carefully to avoid delays in receiving your funds. If you go the safer route of borrowing a personal loan, there may be additional materials required, such as a Social Security card, tax returns, and bank statements.

You can get a same-day loan from car-title lenders, payday lenders, and pawnshops. However, these lenders typically charge astronomically high interest rates and could cause you to fall into a vicious cycle of debt. 

Apply for same-day loans with reputable online lenders or credit unions to get better rates and terms. And be sure to perform your due diligence when comparison shopping. Research each option carefully and read the associated terms and conditions to avoid falling for predatory lenders. 

Related: Learn more about getting a personal loan on Credible.com

Though personal loans are a safer option, here’s why some borrowers may resort to same-day loans, despite the high-interest rates and the often negative consequences:

Though a same-day loan could be a lifesaver in a time of extreme need, it has its downsides. 

Yes, it’s possible to get a same-day loan with bad credit. However, the interest rate will likely be higher, and the payback term could be even shorter. To avoid exorbitantly high APRs and unfavorable terms, improve your credit score first before taking out a loan, then prioritize vetted personal loan lenders (see table above).

Same-day loans should be your last resort for fast cash due to their cost.

Besides traditional personal loans, here are some more affordable alternatives to consider:

Just be sure you can realistically pay off the card’s balance before the promotional 0% APR period expires; otherwise, you’ll face a double-digit APR.