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You can get a loan without a bank account. But beware of limited and expensive options.
Having a bank account — specifically a checking account, in many cases — is a common requirement when you apply for a personal loan.
If you don’t have a bank account, or think you can’t get one, you may still have some loan options. But the loans you might have to choose from — like title loans or payday loans — can be so costly that you won’t want to get one unless you absolutely have to.
Let’s take a look at why it’s hard to get a loan without a bank account, the kinds of loans that might be available and other solutions to consider.
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Why it’s hard to get a loan without a bank account
A bank account plays a big role in lending because it gives lenders insight into your financial situation. Lenders often look at an applicant’s bank account as one piece of the puzzle in trying to figure out if you’re likely to repay what you borrow.
That’s why many lenders make having a bank account a requirement for applicants when they apply for a personal loan.
Some lenders, such as payday or title loan lenders, may consider applicants who don’t have bank accounts. But to offset the risk of lending to an applicant they know less about, these lenders may ask you to provide collateral — an asset, such as a car, that they can take if you don’t repay your loan — and they typically charge high fees and interest.
Loan options if you don’t have a bank account
As with most loan products, your options will vary depending on your credit history, income and a number of other factors.
But before we go there, it makes sense to first consider if you can change your situation by getting a bank account. You may be able to set up a checking account pretty easily. If you’ve had past checking account errors or misuse, look into a second chance checking account. They’re designed to help people who have negative banking history get back in the door.
Beyond that, what are your options?
Friends and family
A loan from someone close to you usually doesn’t come with the requirements — or the costs — that traditional loans do. The downside can be the strain that getting financial help from friends or family can put on relationships. If available, this option can save you a ton and give you a much-needed financial boost. Just carefully weigh the possibilities and risks.
Family loans: What to know before you borrow or lend within the family
Payday or title loans
If you’re facing a true financial emergency, can’t change your banking situation and can’t borrow from someone close to you, your last resort may be a car title loan or payday loan.
We don’t recommend these loan types, because of the costs and financial risks usually associated with them. But if you think you have to take that step, know what’s involved so that you have the best chance of protecting yourself by understanding the costs and what it takes to repay the loan.
Risks of title loans and payday loans
A title loan is secured with an asset you own outright — your car. With a payday loan, the due date for the loan is generally your next payday after you take out the loan.
Both come with some big red flags.
For title loans, here are the potential negatives.
- Equity matters — The loan amount you can apply for largely depends on how much equity you have in the car. According to the FTC, these loans are for $100 to $5,500.
- High APRs — The Federal Trade Commission warns that most car title loans have APRs in the triple digits, significantly higher than the APR of a typical personal loan.
- Repossession — If you don’t pay back your title loan as agreed, your car can get repossessed.
And for payday loans, the typical negatives include …
- Small loans — Primarily, the loans you may apply for are small, often $500 or less.
- High fees — According to the Consumer Financial Protection Bureau, the fees for a typical two-week payday loan can be equal to an APR of almost 400%. That’s a lot more than the APR you’d likely pay on a personal loan.
- Potential debt spiral — If you can’t pay back your payday loan quickly, the fees can add up fast and make your existing financial problems snowball.
Payday alternative loans
We always recommend seeking other means of financing before considering payday or title loans due to the risks we just discussed. One of those options may be a payday alternative loan.
A payday alternative loan is a short-term small-amount loan that’s offered by a federal credit union. Here are some of the benefits of PALs.
- The interest rate is capped at 28%.
- The application fee can’t be more than necessary to cover the cost of processing the application ($20 or less).
- You may apply to borrow between $200 and $1,000.
- Repayment terms may range from one month to six months.
Keep in mind that in order to apply, you’ll need to be a member of a credit union for a period of time. Check with your local branch for further requirements and specifications.
Getting a personal loan without having a bank account could be both expensive and risky, unless you can borrow from a trusted family member or friend.
Before committing to a lender that charges high interest and fees or requires collateral, see if you can open a bank account. A second-chance bank account might be an option that helps you gain some ground financially and positions you for a loan with better terms.
As with all loans, you’ll want to look closely at the loan terms and have a plan to pay it back as agreed.
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