Guide to Flex Loans: What They Are and How to Use Them

Lauren WardUpdated September 27, 2022

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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.

A flex loan is a fast-money loan product that is easy to qualify for. More similar to a credit card or personal line of credit than a loan, a flex loan gives you access to cash to cover expenses whenever you need to (up to a certain limit), and you only pay interest on what you use.Flex loans offer convenience and – yes – flexibility. However, those perks come at a high cost. Here’s what you need to know about flex loans, how they compare to payday loans, and when you may be better off getting a personal loan or personal line of credit.

What Is a Flex Loan?

A flex loan is an unsecured open line of credit. In fact, the term “flex loan” is something of a misnomer. Rather than provide you with a lump sum of cash that you then pay back in installments (like a loan), a flex loan gives you access to funds up to a certain limit that you can repeatedly draw on and pay off. Recommended: What Are Cash Advances?

How Do Flex Loans Work?

Flex loans work in a similar way to credit cards and personal lines of credit. You get approved for a set credit limit and can then withdraw cash at any time up to your approved credit limit, which can be a few hundred to several thousands of dollars.Like a credit card, you’ll receive a monthly statement and will need to make a minimum payment each month until you pay it off. Once you pay off what you borrow, your credit line is replenished.Flex loans are usually unsecured, which means they don’t require any collateral for loan approval. Unlike credit cards and personal lines of credit, you can likely still qualify for a flex loan even if you have poor or fair credit.

How Can You Use a Flex Loan?

Generally, you use the funds from a flex loan however you see fit. Some lenders, however, may have a few limitations on what you can and cannot use the money for, so it’s a good idea to ask about any restrictions before you commit. One common exclusion is using the money as a down payment for a house. Some lenders may also specify that you can’t use the money for business expenses or paying college tuition. Other than these potential stipulations, however, the money can typically be used for just about anything.

Can You Get Flex Loans With Bad Credit?

Yes, it’s often possible to get a flex loan with bad credit. Flex loans are generally easier to qualify for than credit cards, personal loans, and personal lines of credit. Many flex loan lenders will work with borrowers who have low credit scores.

Can You Get Flex Loans With No Credit Check?

Yes, some lenders will approve you for a flex loan without a credit check. However, you will likely still need to prove that you have a steady source of income.Keep in mind, though, that lenders who offer flex loans with no credit check typically charge higher interest rates than those that do credit checks. If you’re looking for no-credit-check debt instruments, there are also no-credit-check personal loans on the market.

How Much Can You Get With a Flex Loan?

Flex loan amounts depend on the lender, as well as the borrower’s qualifications, but tend to fall in the $500 to $5,000 range.

Benefits of Flex Loans

Flex loans offer several benefits for borrowers in need of fast cash. Here’s a look.

Application Process

Most flex loan lenders offer a quick online application process that often takes only a few minutes.

Funds

Once you’re approved for a flex loan, you should receive your line of credit pretty quickly. Indeed, many lenders are able to disburse the loan on the same day or in as little as 24 hours. You will also have easy access to your funds any time you like, as long you don’t exceed your credit limit.

Credit Score Requirements

Even if you have fair or bad credit, you can likely still get approved for a flex loan. However, depending on the lender and your credit profile, you may have to prove that you have a steady source of income.

Disadvantages of a Flex Loan

Flex loans also come with some significant downsides. Here’s how they stack up.

Interest Rates

While many states have laws that aim to regulate predatory lending, flex loans still generally come with steep interest rates. Indeed, they can run as high as 200%, depending on the lender and state. If you’re considering getting a flex loan, it’s a good idea to shop around and try to get the lowest possible interest rate.

Minimum Payments

Like a credit card, you can make minimum payments on flex pay loans. However, doing so will increase the amount you’ll pay in interest. While minimum payments give borrowers some breathing room in their monthly budget, they also increase both the time it takes to pay off the loan as well as the amount of money it takes.

Debt Accumulation

Because the money is sitting there, and it’s possible to make a minimum monthly payment, it can be easy to accumulate debt with a flex loan. Unless you set strict spending rules for yourself, you may end up borrowing (and owing) a lot more than you originally planned.

Will a Flex Loan Hurt My Credit?

It could if you’re not careful. Because a flex loan is technically a line of credit, the amount you use will affect your credit utilization ratio. This ratio is expressed as a percentage and shows how much of your available credit you are actually using. Generally, it’s a good idea to keep your credit utilization ratio below 30%. If you use the entire amount offered to you on a flex loan, your credit utilization ratio will likely go up and that could have a negative affect on your credit scores, even if you make all of your payments on time.

Is a Flex Loan the Same as a Payday Loan?

No. Though flex loans are often offered by payday lenders, they are not the same as payday loans.Generally, payday loans are short-term, high-interest loans (often $500 or less) that need to be paid back with your next paycheck. They do not require any collateral, making them a type of unsecured personal loan.Here’s a look at how payday loans compare to flex loans.

	Flex Loan	Payday Loan
Often requires post-dated check for loan balance	X	✓
Fast application process	✓	✓
Fast loan disbursement	✓	✓
Full payment is required by next payday	X	✓
Entire loan amount is received at once	X	✓
Borrower can choose to borrow only a portion of the approved credit limit	✓	X
Comes with high interest	✓	✓

Is a Flex Loan the Same as a Personal Loan?

No. While flex loans and personal loans are both designed for personal use, they are different loan products. Here’s a look at how all types of personal loans and flex loans compare.

	Flex Loan	Personal Loan
Can borrow larger loan amounts	X	✓
Easier approval	✓	X
Faster disbursement	✓	X
Lower interest rate	X	✓
Receive money in one lump sum	X	✓
Can affect your credit utilization ratio	✓	X
Fixed payment schedule	X	✓

Recommended: Typical Interest Rates for Personal Loans

Should You Consider a Flex Loan?

Only if absolutely necessary. A flex loan can be helpful if you need fast cash for an emergency expense, since you can access the funds quickly (sometimes even hours after approval). Plus, these loans offer more flexibility than other fast-cash offers (like payday loans), since you only pay interest on what you use and can choose to make a minimum monthly payment.However, you pay a high price for those conveniences. Flex loans typically come with much higher interest rates than personal loans, often into the triple digits. What’s more, there’s no end date for the debt, so you can continue borrowing and paying high rates indefinitely. Also, if you need a large loan amount, you’re more likely to get what you need with a personal loan than with a flex loan. Even if you have poor credit, you might still qualify for a much lower interest rate on a personal loan or personal line of credit compared to a flex loan.Recommended: Applying for An Unsecured Personal Loan

The Takeaway

Flex loans are unsecured lines of credit that can be useful if you need money fast and have a low credit score. The drawback is that you’ll likely pay a lot more in interest, and probably won’t be able to borrow as much, as you could with a personal loan. Compared to other high-interest, fast money options (such as payday loans), however, flex loans may be preferable, since they offer more flexible repayment options.Before you take out a flex loan, you may want to explore your personal loan options. With Lantern by SoFi ‘s online lending platform, it’s easy to compare personal loans and shop for the best interest rates available based on your financial circumstances and needs.Compare loan amounts and interest rates today with Lantern by SoFi.

Frequently Asked Questions

How much can you get with a flex loan?

Will a flex loan hurt my credit?

Is a flex loan the same as a payday loan?

Photo credit: iStock/jacoblund

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About the Author

Lauren Ward

Lauren Ward is a personal finance expert with nearly a decade of experience writing online content. Her work has appeared on websites such as MSN, Time, and Bankrate. Lauren writes on a variety of personal finance topics for SoFi, including credit and banking.

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