Flexible loans, or “flex” loans, are basically the lending industry’s version of a get-rich-quick scheme. A flexible loan can provide you with quick access to money. However, you should proceed with caution.
These loans tend to come with very high APR rates.
A flexible loan functions in a similar way to a credit card. Your lender gives you a credit limit. You can then borrow as much as need as long as you don’t go over the limit.
These kinds of loans are usually available without a credit check, making them appealing to people who have poor credit.
Many lenders charge weekly or daily fees that can drive the effective APR for these kinds of loans to more than 200 percent. This makes flexible loans very expensive.
Individuals can become stuck and will end up making minimum payments that barely cover the interest and fees. Because there is no set term for a flexible loan, the payments can go on for years and years.
Are you wondering if a flexible loan is right for you? If you are, then keep on reading and we’ll walk you through everything you’ll want to know.
What Is a Flexible Loan?
A flexible loan is an unsecured line of credit. It gives the borrower access to money, up to a set limit. This is similar to a line of credit or a credit card.
The flex loan will allow you to take out less money than the limit if you don’t need the maximum amount. You’ll only pay interest on the balance that you currently owe. You can also borrow more money at any time as long as you don’t go over the limit.
Borrowers will usually take out flexible loans for emergencies, like auto and home repairs. They also might use it to cover their monthly bills.
Some people will take out flexible loans to cover medical expenses and to consolidate other high-interest debt.
The fees and interest rates for flexible loans are usually very high. This is because they’re offered to borrowers who are considered to be high-risk. Lenders will usually charge as much as the law allows for flexible loans.
A person’s payments are going to depend on how much money they took out. A monthly statement will let you know how much money you have borrowed and what your monthly payment is.
If you only make the minimum payment, then it might take you years to pay the balance off.
The lenders who provide flexible loans are usually companies that make title and payday loans. These lenders are known for trapping borrowers in a cycle of increasing debt.
Pros of a Flexible Loan
A flexible loan is appealing to poor credit borrowers because it’s an easy and fast solution.
Some flex loans don’t come with a credit check. They also come with an easy application and fast approval.
Flexible loans provide you with easy access to money and come with flexible payment terms.
They also let you borrow up to your credit limit and you can take out less if you want.
If you do get a flexible loan, you’re best off going with a private lender. Check out these advantages of going with a private lender to learn more.
When to Use a Flexible Loan
You might be in an emergency and feel that it’s necessary for you to take out a flexible loan. For example, if you don’t have good credit and you know that you’re going to need help in paying for your living expenses over the next several months, then you can use a flex lender. This is really helpful if you don’t know how much money you’re going to need.
It’s usually best in situations where you need a flexible borrowing allotment for immediate funds and for people who have low credit and can’t get loans anywhere else.
In this case, you’d gain some peace of mind by knowing how much money you’re approved for but you’ll only have to pay off however much you borrow.
When Not to Use a Flexible Loan
You shouldn’t use a flexible loan if you’re able to get a personal loan that costs less. You also should avoid a flex loan if you can get a personal line of credit from a credit union or bank.
It would be smart to not use these costly loans for unnecessary expenses, such as remodeling or vacations. Instead, you should put those expenses off until you can save up enough money. You can also take the time to build up your credit score so you’ll be able to get better loan terms.
Due to the high rate of interest, flexible loans aren’t good for people who want to consolidate debt. If you have a poor credit score and need to borrow money, you might be better off finding a different bad credit loan that’s available to you.
The Importance of Knowing What Flexible Loans Are and How They Work
Hopefully, after reading the above article, you now have a better idea of what flexible loans are and how they work. As we can see, flexible loans can be appropriate for people who have poor credit and need access to money immediately. However, you should consider the interest rates and fees before you take out a loan.
Are you looking for other helpful financial articles? Check out the rest of our blog today for more!