The Pros and Cons of Flex Loans

LOS ANGELES, February 18, 2021 (Newswire.com) - If you need money now and you've yet to establish a credit history, the options for borrowing money can be limited. Whether you're new to credit or need access to cash quickly, flex loans are a great option to consider.

What is a flex loan?

Flex loans are similar to a personal line of credit, but with more favorable eligibility requirements for those who may have a below average credit score or limited credit history.

These unsecured loans (meaning there's no collateral like a home or car backing it) enable borrowers to maintain a revolving line of credit with an established limit. Borrowers can use money up to their limit, pay it down little by little, and use the remaining credit after making payments.

Benefits of flex loans

There are many benefits to taking out a flex loan, especially if you're working to build a better credit score.

• Limited eligibility requirements: Lenders offering flex loans may not even require a credit check. They may also accept borrowers who have been turned down for other types of loans based on a below average credit score. The lower barriers to entry make a flex loan something to consider if you need cash quickly.
• Get money fast: The open line of credit on a flex loan is typically available in days.
• Flexible payment terms: With a flex loan, you can choose to pay the full amount at one time or make schedule payments. You only pay interest on the money you borrow. That said, depending on your spending habits, you may choose to pay more some months to pay down the loan quickly and have relatively low minimum payments overall.

Potential downsides of flex loans

A revolving line of credit via a flex loan can seem like an excellent solution for those who may not have other easy access to funds. But there are some potential downsides to consider before you apply.

• High interest rates: As with other unsecured loans, flex loans tend to charge a higher interest rate since there is no collateral to ensure the payment. Lenders charge more interest on flex loans, reflecting the higher risk they take by lending you money without a guaranteed return.
• Flexibility may lead to higher spending:  A flex loan is more like a credit card than an auto loan as there is no set payoff date. As long as you continue to pay down the balance, you'll continue to have available credit. And that means it's easy to slip into the habit of paying down amounts only to spend it again.

Is a flex loan right for me?

If appropriately managed, a flex loan can serve the purpose of getting you access to money in a pinch. It can also lead to lower overall costs than a lump sum loan with a similar interest rate.

However, if you have collateral or a high enough credit score, looking at options for alternatives like a personal loan or credit card may land you with a lower interest rate. Whichever route you take, make sure you fully understand the flex loan requirements and payment terms before borrowing.

Notice: There are a wide variety of loan products available in the marketplace, so your choice of lending products should match your financial needs. Small-dollar loans used over a long period of time can be expensive.

Source: iQuanti, Inc.