Many lenders—including both online lenders and brick-and-mortar banks—advertise guaranteed-approval personal loans. Also known as payday loans, guaranteed personal loans are usually secured by your paycheck. Basically, lenders use this type of loan to approve anyone, regardless of his or her credit score. Some lenders will offer cash on the same day that you apply for the guaranteed personal loan, even without checking your credit.
These offers can sound appealing, especially if you have shaky credit, don’t have savings to fall back on, or need money immediately for a financial emergency. But unfortunately, guaranteed-approval personal loans usually come with a catch. Often the only sure thing with a guaranteed personal loan is that you are more likely to owe more than you bargained for down the line. They usually come with high interest rates, among other extremely unfavorable terms.
It may feel like taking out a guaranteed personal loan is your only choice, but you have other options. Consider asking family or friends for help, requesting an advance from your employer, or applying for emergency help from a local community organization. If those options aren’t available to you, try applying for an unsecured personal loan.
Lenders offering unsecured personal loans won’t guarantee your approval, but many, including SoFi, look at more than just your credit score to determine your eligibility and you may be surprised to find that you still qualify.
Further, many online lenders are trying to make the process of getting funded for unsecured personal loans quicker as well. If you do, taking out an unsecured personal loan can be a safer bet for getting the cash you need now without paying dearly for it later.
The Drawbacks of Guaranteed Personal Loans
Guaranteed-approval personal loans may indeed get you money fast, but we all know there’s no such thing as a free lunch. The repayment terms you may be stuck with will often be extremely disadvantageous, even predatory.
For example, lenders who offer guaranteed loans could ask you to repay the debt in a matter of weeks. If your finances don’t improve and you can’t pay back the loan, your debt could grow exponentially. Guaranteed personal loans might even charge the equivalent of 400% interest . So if you’re already having a tough time financially, taking out a payday loan can be on slippery slope.
Unsecured personal loans, on the other hand, aren’t secured by personal assets to recover in case of default, which is why lenders are more careful about who they lend to.
Why an Unsecured Personal Loan Might Cost Less
The easy money that comes with a guaranteed-approval personal loan can bear a high cost. When you take out a payday loan, you might end up paying $10 to $30 for every $100 borrowed. That means if you borrow $300, you could have to pay back up to $390 in a short period of time. And if you don’t pay the loan off completely, you could face additional fees.
An unsecured personal loan is not guaranteed-approval, but it could cost you less in the long run. Unsecured personal loan rates usually aren’t as low as interest rates on some student loans or mortgages, but they could still be lower than rates associated with payday loans.
Furthermore, taking out an unsecured personal loan can come with a more reasonable repayment timeline that could help prevent you from falling into default or mounting high-interest debt.
What does SoFi consider when issuing personal loans?
SoFi offers unsecured personal loans from $5,000 to $100,000 with low fixed interest rates and flexible repayment terms. You won’t have guaranteed approval, but SoFi takes a number of factors into account to make sure all applications are fairly considered.
SoFi looks not just at your credit score but also at your financial history, your monthly income and expenses, your career experience, and your current employment. If you qualify, a personal loan can be a more responsible and less costly way to deal with a financial emergency.
Need money fast but don’t want to fall into a high-interest debt trap? See if you qualify for a personal loan with SoFi.
SoFi Lending Corp. or an affiliate is licensed by the Department of Business Oversight under the California Financing Law, license number 6054612.
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