Best Direct Deposit Loan Alternatives – Direct deposit loans are one of the lenders that offer quick loans to borrowers with almost no questions asked. It is one of the options to consider when taking quick loans. Unfortunately, it is one of the riskiest lenders to get a loan from. It is also very expensive, and it can lead to a hazardous cycle of debt, which is quite hard to get out of.
Luckily, there are different alternatives to consider when looking for a quick loan. These alternatives have their various fees and interest rates, but they are still one of the recommended alternatives for a quick loan. In this write-up, these alternatives will be listed and explained.
How Do Direct-Deposit Loans Work?
Direct deposit loans are from a lender that allows you to borrow money from them, and they directly deposit the money into your account. This is how they got the name. Once you apply and get approved for a loan, your money will be deposited within 24 hours of your application. These loans, known as payday loans, are accompanied by steep fees and high interest rates that can be financially burdensome
A direct deposit loan application is fast; it requires you only to have a job, a bank account, and an ID. These lenders don’t check the credit history of their borrowers. This lender only lends less than $1,000 on short terms, which are due mostly on your next payday. Many borrowers use direct deposit loans when short on cash for little expenses like rent, food, or car payments. This sounds like a good idea, but these loans have high rates and fees.
Best Direct Deposit Loan Alternatives
There are several alternatives to direct deposit loans you can check out. You can easily access these alternatives when you need quick cash. Personal loans from online lenders are also considered a fast way to get quick cash. Interest rates and fees for personal loans depend on your credit history and other factors, but these financing options are more affordable than direct deposit loans.
Payday Alternative Loans
Some federal credit unions offer payday alternative loans, which are known as PALs. This loan allows you to borrow up to $2,000 and allows you a refund between one and 12 months, depending on the lender’s terms. These lenders have a maximum interest rate of 28%, and their additional fees do not exceed $20. Their credit requirements vary depending on the lender, while some lenders may not carry out any credit checks for this loan. However, it is important to know that not all credit unions give payday alternative loans to their members.
Build an Emergency Fund
Another way to avoid high interest rates is to grow a solid emergency fund for future use. Even if it is just a small amount of money you can save every month, it puts you in a better position to handle unexpected expenses whenever they occur.
Credit cards
A means of financing also includes credit cards. It is known for its high interest rates. A credit card’s average interest rate is 18.43% as of 2022. Just like other lenders, this lender’s offer depends on your credit history. If you make full payments every month or have a good credit history, it is possible to avoid additional fees. However, you can borrow money for a short period without any added interest.
Differences between online personal loans and direct deposit loans
Every lender differs from each other, but online personal loans and direct deposit loans are known for fast funding. There are differences between these two lenders. The table below shows a brief explanation of their differences.
| APR | Loan amounts | Repayment terms | Funding speed | Minimum credit score | |
| Online personal loan | As low as 5.99% (varies) | Up to $100,000 | 1 to 7 years | As soon as the next business day | Typically, 670; some lenders permit scores as low as 560. |
| Direct deposit loan | Fees equivalent to APRs of up to 400% | Often up to $500 (perhaps $5,000 with a direct deposit installment loan) | Typically, by your next pay period | Same or next business day | No credit check required |
These are the differences between online personal loans and direct deposit loans.
Why should you Consider a Direct Deposit Loan Alternative?
The direct deposit payday loan is quite unaffordable and has a high risk. The high fees associated with this loan make it difficult for borrowers to repay their debts. This can lead to a bigger financial issue for the borrower in the future. Thus consider alternative payday loans to avoid issues.