What to know about flexible loans and how they work

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Flexible loans are convenient, but can come with high costs. (Shutterstock)

If you’ve ever needed instant access to cash to cover an immediate financial emergency, you may have wondered what type of loan could help you. Flexible loans are easy to get, even if you have bad credit. Unfortunately, they usually come with very high interest charges, regardless of the length or amount of the loan.

Let’s take an in-depth look at how flexible loans work, their pros and cons, and how they compare to quick cash alternatives like a personal loan from an online lender.

What is a flexible loan?

A flexible loan is not like a normal personal loan – in fact, it is not a loan at all. Flexible loans are unsecured personal lines of credit that work much like a credit card. But they tend to be more expensive than credit cards.

Flexible loans offer two key benefits: if your credit is weak or limited, you can usually get a flexible loan and you can receive funds immediately. You might consider a flexible loan when you need cover an urgent expense and are unable to obtain a Personal loan.

Flexible loans usually come from cash advance establishments and online lenders. Some banks and credit unions may offer flexible loans, but keep in mind that they may refer to a personal loan as a “flexible loan”. Personal loans are not lines of credit.

How do flexible loans work?

When you take out a flexible loan, the lender gives you access to a line of credit. You use this credit as needed and make a payment each month until you pay off the balance. You can choose to pay only the minimum, pay extra, or pay in full each month. Flexible lenders charge interest only on the amount you borrow and any balance you carry from month to month.

Although lenders do not charge additional fees – such as loan origination fees – the annual percentage rates for flexible loans tend to be very high, making them a more expensive option compared to other short-term loans.

What can you use a flexible loan for?

Like personal loans, flexible loans can be used for any purpose. But many borrowers use smaller flexible loans to bridge the gap if they have big monthly bills, unexpected car repairs, or medical bills due between paychecks.

Due to their very high APRs, flexible loans should really only be an option when you can’t cover an emergency cost in a cheaper way.

How much can you borrow with a flexible loan?

All loan amounts and terms will be unique to the lender you choose. Typically, however, flexible loans can cost as little as $100 up to several thousand dollars.

Similar to credit cards and personal loans, borrower approval will depend on a number of factors. Some lenders may require proof of citizenship, employment, bank account, and that you are 18 or older.

How much do flexible loans cost?

Flexible loans typically come with very high interest rates and fees that can reach APRs of 200% or more. In contrast, credit card and personal loan APRs are typically only in the double digits, even for borrowers with poor credit. Since the APR encompasses both the interest rate and the fees associated with the loan, it is a better indicator of the true cost of a credit product.

The overall costs of flexible loans depend on the amount you borrow, the interest rate, and how long it takes you to pay it back. As with any type of revolving credit, if you only make the minimum payment each month, repayment of the loan may take longer.

Before taking out a flexible loan, be sure to check personal loan rates. Some lenders offer loans to people with less than perfect credit, and online lenders can often provide next business day financing.

Flexible loans vs credit cards

Although both are revolving lines of credit, credit cards have some advantages over flexible loans. A credit card can have a higher maximum credit amount than a flexible loan. And while credit card interest rates are generally higher than personal loan interest rates, they’re still significantly lower than typical flexible loan APRs. But it can be difficult to qualify for a credit card if you have little or no credit history.

Flexible Loans vs Payday Loans

Payday loans are short-term, high-interest loans that must be repaid on the borrower’s next payday. APR for payday loans can be 390% or more, according to the Consumer Financial Protection Bureau. This is significantly higher than typical flexible loan APRs. For payday and flexible loans, if you pay late, the lender will assess fees which can be high.

Advantages and disadvantages of flexible loans

All financial products have advantages and disadvantages. It is important to weigh the pros and cons before committing to a flexible loan.


  • It’s usually easy to qualify for a flexible loan, and most borrowers can get one even with poor or limited credit history.
  • Loan approval is usually fast and the release of funds is just as fast.
  • Unlike a traditional loan, you can continue to access your line of credit after the first withdrawal. This allows you to access more funds in an emergency.

The inconvenients

  • High APRs make flex loans a very expensive form of credit.
  • If you only pay the minimum each month, interest and fees can pile up, pushing you into expensive and hard-to-pay debt.
  • Access to an unsecured open line of credit could tempt you to overspend.

Alternatives to flexible loans

Flexible loans aren’t the only option if you need money fast and your credit is weak. Before committing to a high-cost credit product, consider these alternatives:

  • Personal loans for bad credit — Personal loans for bad credit are fixed rate loans for borrowers with lower credit ratings. Although a bad credit score may earn you a higher interest rate than a good credit score, a personal loan with bad credit usually has a much lower APR than a credit card or credit card. a flexible loan.
  • Auto Repair Loans — These loans are used to cover car repairs and are spread in a lump sum. No collateral is required for these unsecured loans. Borrowers who need to cover repair costs while waiting for insurance settlements might choose this over a flexible loan.
  • Credit-generating loans — Credit-building loans are designed to help borrowers with poor or no credit history build credit responsibly. Instead of getting the money up front, however, you get the loan back after making a certain number of payments. Credit-generating loans often repay at the end of the loan term, so they may not be a good option if you need cash immediately to cover an unexpected expense.
  • Short-term loan Short-term loans require little or no collateral and have shorter repayment terms. Although they require a credit check, lower annual interest rates and faster repayment terms offer borrowers a responsible way to obtain funds and get out of debt quickly.
  • Peer-to-peer lending — Online peer-to-peer lending is a non-traditional way to borrow money directly from independent lenders or investors. Although lending sites set different rates and terms, some borrowers may qualify for competitive rates and low fees.

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