If you regularly find yourself a little short of cash each month, a flex loan might seem like a good idea. It’s a line of credit rather than a loan, so you can draw on it as often as needed without having to reapply. However, flex loans come with high APRs and may have additional fees, so be sure to consider all your options.
A flex loan is a revolving line of credit — kind of like a credit card. It’s often unsecured, although some lenders offer a secured option. Flex loans are typically fast and easy to qualify for and usually don’t require a hard credit check. Lenders may offer credit limits as small as a few hundred dollars or as large as several thousand.
Unlike installment loans, where you receive a lump sum of cash and start repaying it immediately, flex loans allow you to borrow only as much as you need up to your approved credit limit. You’ll only pay interest on the amount you use, not the full credit line.
These loans are generally geared toward borrowers with bad credit who may have difficulty qualifying for other types of lending. As a result, interest rates are typically much higher than other loan types or even credit cards — and could reach triple digits. You may also have to pay additional fees on top of interest.
Flex loans work a lot like credit cards. After you apply, a lender assesses your finances and offers you a preset credit limit, which you can then draw on as often as you like up to your limit. Interest only starts to accrue once you withdraw funds, and you’ll only pay interest on the money you use.
As you withdraw money, you’ll start making regularly scheduled payments. While you’re only required to make the minimum payments, you can always opt to pay extra or pay off the entire balance without penalty. As you repay the money, the credit limit is replenished, and you’re free to borrow more.
The cost of flex loans can vary significantly depending on the lender and the state you live in. For example, one flex loan lender charges APRs between 240% and 450%. However, some lenders don’t disclose rates up front, so make sure you understand the rate before agreeing to the loan. In general, you should expect to pay APRs in the triple digits.
Lenders that offer flex loans might also charge fees in addition to interest and may not readily disclose them. These fees could include an application or account opening charge, monthly maintenance fees or transaction fees. Ask questions of the lender and read your agreement carefully so you know exactly what you’re getting into.
Flex loans are most commonly provided by lenders who offer payday loans, title loans and other types of high-interest lending. Because of individual state regulations, they aren’t available in all states. You may be able to apply online for flex loans, and some lenders have branch offices throughout the country that you can visit.
Specific requirements may vary by lender. In general, you’ll need the following:
Most flex loan lenders don’t conduct a hard credit inquiry, but they may do a soft credit pull, which won’t affect your credit score.
While flex loans can be a convenient option for borrowers who need access to a revolving line of credit, it’s not without drawbacks.
Flex loans are best for borrowers who often find themselves short of cash and don’t qualify for other types of lending. If you only need the funds to bridge occasional shortfalls, this may not be a problem.
But if you find yourself up against your credit limit and can only make the minimum payments, you may need to think about cutting back on spending or increasing your income.
Some more traditional banks, credit unions and online lenders offer a version of flex loans — often simply called personal lines of credit (PLOCs). But these are not to be confused with payday lender flex loans. PLOCs generally have lower rates but much stricter requirements to apply. You’ll likely need at least a 680 credit score to qualify.
Flex loans aren’t the only option to help with occasional cash flow shortages or to cover emergency expenses.
A flex loan can be a convenient way to access a revolving line of credit, especially if you have a poor credit history and need money fast. But before you go that route, be sure to explore less expensive options, such as cash advance apps, PALs, credit cards or personal loans. Even borrowers with less-than-perfect credit may qualify for lending sources that don’t reach the triple digits.
Most flex loan lenders don’t check borrowers’ credit scores — or if they do, it’s only a soft credit pull. These types of lenders are more concerned with your employment and income, so you’ll probably qualify even with a bad credit score.
A payday loan is a lump sum of cash you’ll typically have to pay back within two weeks or on your next pay date. If you need another one, you’ll have to apply again. A flex loan, by contrast, is a revolving line of credit that you pay back as you use it, and it replenishes as you pay it off, saving you from having to reapply.
How many flex loans you can have depends on the lender. In general, you can only have one at a time.
Borrowing limits vary by lender but could be as low as $100 or up to $4,000. The amount you can get also depends on where you live because each state has different regulations on these types of loans.
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