If you have bad credit and regularly need loans due to inconsistent income or unexpected expenses, a flex loan may seem like a good idea. A flex loan refers to an open line of credit that is typically unsecured. It allows you to borrow what you need up to your credit limit, pay back that amount with interest, and refresh the funds available to you.
But some flex loans have high annual percentage rates (APRs), which can make it difficult to stop borrowing. These flex loans could leave you deep in debt. Others, like some offered by banks and credit unions, may have reasonable fees and APRs.
Here’s what you should know about flex loans before getting one, how to find a good flex loan, and flex loan alternatives.
What is a flex loan?
A flex loan is a line of credit, which works kind of like a credit card. The lender approves you for a credit limit, which is the maximum amount available for you to borrow and is often available the same day you apply. You can borrow up to that amount, and as you repay your balance, your credit line replenishes. You’ll generally have a minimum required payment each month, but you can also pay more than that without penalty.
These loans are designed so that borrowers with bad credit are eligible — the lender may not even conduct a credit check. Plus, flex loans are typically unsecured, which means you won’t have to give up an asset in the event you can’t make payments.
Good to know
Some lenders do offer secured loans — for one secured by your car, for example, you may give the lender a set of keys. It’s best to be wary of secured flex loans, however, since you could lose the collateral if you can’t make payments.
How do flex loans work?
When you borrow against your line of credit, you’ll be required to make minimum monthly payments with interest. Interest rates on flex loans may be fixed, with predictable monthly payments, or variable, with payments that change with current interest rates.
A flex loan’s APR represents the cost to borrow money, and is a good way to compare costs between different flex loans and other loan options. This is especially important since some flex loans have triple-digit APRs, while others are affordable short-term funding solutions.
One advantage of flex loans is that you don’t have to reapply every time you need money, and you can usually access funds quickly. You can also get approved for a flex loan with bad credit. But you should understand the specific fees of any flex loan you’re interested in to avoid overpaying and potentially getting stuck in a cycle of debt.
Flex loan fees
Flex loan fees can vary significantly by lender — in fact, some flex loans offered by banks and credit unions can be a relatively low-cost way to get access to money fast if you have bad credit. For example, if you’re a Wells Fargo customer, the bank offers flex loans of $250 or $500 with a flat fee of $12 or $20. You pay it back in four monthly installments without interest. These fees equate to very reasonable annual percentage rates (APRs) of less than 20%. If you’re with a credit union that offers flex loans, you may be able to get one with an APR of 28%.
But, as noted, some lenders offer much more expensive flex loans. We found this was more likely if they operate primarily out of storefronts and/or also offer payday loans. For example, the APRs on one lender’s flex loans were over 200% in Florida, and 450% in Idaho.
To put this in perspective, if you borrowed $1,000 against your line of credit at a 280% APR and you needed a year to repay the money, you’d pay more than $2,000 in interest over time. That makes some of these loans risky. As you put money toward the minimum payments, you’ll have less in your budget to manage everyday expenses. That can lead you to borrow again and again, making it hard to get out of debt.
By contrast, traditional personal loans come with lower APRs. The average interest rate on a 24-month personal loan was just 12.49% in February 2024, according to the Federal Reserve. While a personal loan can be more difficult to obtain than a flex loan, especially for bad-credit borrowers, some online lenders are lenient with their credit score requirements. Explore bad-credit personal loans and other alternatives before applying for a flex loan, especially if you need to borrow more than $500.
How to get a flex loan
You can find flex loans from some banks, credit unions, and online or brick-and-mortar payday lenders. Based on our research, banks and credit unions are much more likely to have reasonable fees and repayment terms. To get a flex loan, you may need to provide the following:
- Photo identification, like your ID or passport
- A document verifying your Social Security number
- Proof of income, like a pay stub
- Proof of a checking account, like a bank statement
- A personal check
If you’re applying for a secured flex loan, you may also need to provide other documents, like the title to your vehicle.
Flex loan alternatives
If you need a flex loan with a large credit line, or can't get one from a bank or credit union, it may not be the best solution. Some alternatives include:
- Personal loans for bad credit: A personal loan provides you with a sum of money upfront, which you repay in fixed monthly installments over time. You can borrow up to several thousand dollars and repay the loan over months or years. Personal loans often come with lower interest rates than flex loans or even credit cards, and it’s possible to be approved with fair or even bad credit. But you may need to add a cosigner to the loan or secure it with collateral to qualify.
- Payday alternative loans (PALs): PAL I and PAL II loans are offered by credit unions as an alternative to payday loans. PAL II loans offer more flexibility, allowing new credit union members to take out loans up to $2,000 and repay them over 1 to 12 months. Interest rates are capped at 28%. PAL loans are typically available to bad-credit borrowers and sometimes don’t require a credit check.
- Cash advance apps: If you only need a few hundred dollars and you have a bank account and a regular source of income, you can use a cash advance app to get an advance on your paycheck, without a credit check. Some apps don’t charge interest or fees, and only request optional tips. But you’ll typically pay a fee to get your money fast, which could translate to a triple-digit APR.
- Friends and family loans: Borrowing from a friend or family member can help you get back on your feet without the concerns of a high-interest loan. Make sure to build repayment into your budget and put repayment terms in writing so you don’t hurt the relationship.
FAQ
Do flex loans hurt your credit?
Flex loans don’t typically require a hard credit check to apply, but late payments or default could be reported to the credit bureaus, especially if you get a flex loan through a bank or credit union. However, on-time payments could be reported as well, which might improve your credit. Ask the lender whether it reports flex loan payments to the credit bureaus to be sure.
Is it hard to get a flex loan?
If flex loans are available in your state, you can likely access one even if you have bad credit. However, you’ll need a source of income and a checking account, and you’ll need to provide your Social Security number. If you bank with a credit union or bank that offers flex loans, getting one there could be easier and much cheaper.
How much can I get with a flex loan?
Flex loan credit limits typically allow you to borrow several hundred to several thousand dollars, but it depends on the lender. The lender will consider your financial situation (though may not check your credit) when determining your credit limit.
