Key takeaways

  • Direct deposit loans are a type of loan that gives you quick access to cash that is deposited directly into your bank account.
  • Personal loans are a better alternative to direct deposit loans, offering lower rates and longer repayment terms.
  • Other alternatives to direct deposit loans include payday alternative loans, early payday apps, and cash advances on credit cards.
  • It is important to carefully consider all of the direct deposit loan alternatives to choose one that will improve, not worsen, your financial situation.

Direct deposit loans cater to borrowers with past credit issues experiencing financial hardship. These debt products are typically deposited into your bank account the same or next business day, making them a convenient option if you need fast cash.

Still, there are drawbacks to consider. Direct deposit loans often come with very high interest rates, meaning the cost of borrowing is higher than alternatives. So, you should avoid these loans if possible.

What is a direct deposit loan?

A direct deposit loan is a type of loan that allows you to receive funds directly in your bank account after approval. Many companies market payday loans as the best direct deposit loan option because they require very little for approval and funds can be available the same day you apply in some cases. Lenders typically only need to verify the direct deposit of your paycheck for approval. Many don’t require a credit check.

Aside from annual percentage rate (APRs) of over 100 or even 600 percent, the biggest danger of choosing payday loans is the two-week repayment term. If you can’t repay the entire balance plus the fee within that period, you may end up extending or taking out a new one. Many payday borrowers end up in a cycle of debt that makes their financial situation worse.

Fortunately, there are seven direct deposit loan alternatives that cost much less than payday loans and give you cash just as quickly, but with more time to pay them off.

Lightbulb
Bankrate insight

Higher inflation often leads people with low wages living paycheck to paycheck to take out payday loans. As the cost of day to day needs like groceries and gas goes up, consumers often find themselves short of cash in between pay periods. It’s critical to know the alternatives to payday loans to avoid the potential trap of recycling this very expensive form of debt.

The 7 best alternatives to payday direct deposit loans

Personal loans

A personal loan is a direct deposit loan option that typically gives you one to seven years to pay the money you borrow. Bad credit personal loan rates generally cap out at 35.99 percent. That’s far less than the triple-digit rates you’ll pay with a payday loan.

Funds can be directly deposited on the same day you apply with some lenders. You’ll need to borrow at least $1,000 in most cases, so keep that in mind if you decide to get a personal loan.

Check out the table below for quick details about some of the best bad credit lenders we’ve reviewed.

Lender Est. APR Loan term Loan amount Minimum credit score
Upstart 7.80%-35.99% 3 - 5 years $1,000–$50,000 No minimum
OneMain Financial 18.00%-35.99% 2 - 5 years $1,500–$20,000 Not disclosed
Upgrade 8.49%-35.99% (with autopay) 2 - 7 years $1,000–$50,000 600
Best Egg 8.99%-35.99% 3 - 5 years $2,000–$50,000 600
Avant 9.95%-35.99% 1 - 5 years $2,000–$35,000 550
LendingPoint 7.99%-35.99% 2 - 6 years $2,000–$36,500 600

2. Payday alternative loans

Borrowers who don’t quite qualify for standard personal loans may have better luck with a payday alternative loan. This type of direct deposit loan still comes with triple-digit APRs, but they’re often less than what you’d pay for a payday loan.

The best part is that repayment terms are typically measured in months, not weeks. This removes the pressure of paying off the loan by your next payday and gives you more time to work out your finances.

These products also don’t require a minimum credit score and are approved based on your income and banking history, much like payday loans. Funds are usually delivered to your bank account within one business day of approval. Most lenders that offer these types of loans don’t charge prepayment penalties, which means you can pay your high-rate balance off faster without a fee.

Bankrate has reviewed the payday alternative products of the lenders in the table below to give you an idea of the terms you can expect.

Lender Loan amount range Est. APR Loan term
OppLoans $500-$4,000 160.00%-179.00% 9-18 months
Personify $500-$15,000 19.00%-179.50% 12-48 months
Rise $300-$5,000 36.00%-299.00% 4-36 months
Possible Finance Up to $500 151.70.00%-460.00% Up to 8 weeks

3. Early payday apps

If you don’t want to borrow money or don’t need to borrow $1,000 or more with a personal loan, there are a number of early payday apps that may meet your cash needs. These apps allow you to have a portion of your paycheck direct deposited before your next period. Some apps even allow you to borrow up to $750 in between paychecks, nearly three times more than the average payday lender allows.

No credit check is required. Approval is based on proof of paychecks deposited into your bank account, just like a payday loan.

The advance is paid back when you get your paycheck, and some pay advance companies don’t charge a fee. However, you may have to pay extra for instant cash delivery or pay a subscription fee to participate. And, of course, these options mean part of your next paycheck is already spoken for.

We’ve highlighted some of the payday advance companies reviewed by our expert editorial team.

Pay advance company Maximum advance per pay period Advance fees Monthly subscription cost
EarnIn $750 $0 for standard$3.99 for instant $0
Brigit $250 $0 for standard$0.99-$3.99 for instant $9.99
Dave $500 $0 $1.00

4. Cash advance on your credit card

You may be able to take a cash advance from the available balance on one of your credit cards. Check the fine print on your credit card disclosures to find out how much your rate will be. It’s typically higher than the rate you pay for normal charges. Plus, interest starts growing immediately, rather than after a grace period.

While this may be an easy way to get some extra cash, it could knock your credit scores if you don’t pay the balance off before your next billing cycle. Your credit utilization ratio measures how much of your available credit you’re using, and if it exceeds 30 percent it may impact your credit score.

5. Employer salary advances

Ask your employer if you can get an advance on your next paycheck. Check your company benefits, too. Many employers offer free financial counseling services for employees to help them manage their money.

6. Pawn loans

If you have valuable personal items, a pawn shop may lend you money using one of your valuables as collateral. However, fees are often high for these types of loans. You could lose your item if you can’t repay the loan.

7. Nonprofit, community and government assistance

You may be able to get help paying for the bare essentials like food and utilities through programs offered by local nonprofits or community and local governments. The programs are designed to provide assistance to people in dire financial situations such as a sudden loss of income due to job loss or other emergency situations.

Pros and cons of direct deposit loans

Direct deposit loans come with benefits and drawbacks worth considering before deciding if they’re a good fit for you.

Green circle with a checkmark inside

Pros

  • You may be approved and receive funds the same day you apply.
  • Approval doesn't usually require a credit check.
  • Funds are deposited directly to your bank account.
Red circle with an X inside

Cons

  • Highest APRs of any loan type.
  • You must repay the entire balance plus fees by your next paycheck.
  • Can lead to costly debt rollovers that increase your debt load.

Pros and cons of alternatives to direct deposit loans

Direct deposit loan alternative Pros Cons
Personal loans
  • Longer repayment terms.
  • Much lower APRs than payday loans.
  • Higher loan minimum than payday loans.
  • Approval depends on credit score.
Payday alternative loans
  • APRs two to three times lower than payday loans.
  • Longer repayment terms.
  • Higher APRs than personal loans.
  • Shorter terms than personal loans.
Early payday apps
  • May not have to pay any fees for regular deposits.
  • Access to more cash between paychecks.
  • Fees may apply to instant cash needs.
  • Apps may charge monthly subscription fees.
Credit card cash advance
  • May already be available on existing credit cards.
  • Doesn’t require applying for new credit.
  • Higher APRs usually apply to cash advances.
  • May drop your credit score if balance isn’t paid off.
Employer salary advance
  • No interest or fees typically charged.
  • No new credit.
  • Employer may not offer.
Pawn shop loans
  • Quick cash for items you already own.
  • Loans is based on item’s value, not your credit.
  • Fees may be very high.
  • You could lose your valuable if you can’t repay the loan.
Nonprofit or government assistance
  • May offer grants to help with emergencies.
  • Repayment may not be required.
  • You may not qualify based on income or other criteria.
  • May not be available in your area.

Personal loan vs. direct deposit loan

If you’re still trying to choose between a payday loan or a personal loan, seeing the features side by side may make the decision easier.

Loan feature Direct deposit payday loan Bad credit personal loan
Rates Up to 650% Up to 35.99%
Loan amount minimum $250 standard minimum $1,000 at most lenders
Loan amount maximum Up to $500 Up to $100,000
Loan term On your next payday or two weeks 1 to 7 years
Time to funds As soon as the same day As soon as the same day
Credit score No minimum credit score requirement with most lenders Credit score typically required, but may be as low as 550

The bottom line

If you need money quickly, direct deposit loans may seem convenient. However, direct deposit payday loans often have high interest rates and short repayment terms on unaffordable debt.

Fortunately, there are better alternatives — such as personal loans — with lower rates and longer repayment terms. Consider all your options before you choose any type of financing. Look for assistance from non-profit organizations or government programs if you cannot afford essentials.