5 Loan Types and What To Know (2024)

If you need cash before your next paycheck, there are places you can turn. You can get a $500 loan via a personal loan, payday loan, payday alternative loan, cash advance app, or credit card cash advance. However, some options are better than others.

Some small loans come with high costs that can cause financial hardship. For example, payday loans often have triple-digit annual percentage rates (APRs), such as 400%. While one may help you get to your next paycheck, repaying it could put you further behind.

However, not all small loans are expensive. Compare APRs, fees, payment amounts, and repayment periods to find a $500 loan that comfortably fits your budget.

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1. Personal loan

A personal loan is a lump-sum loan that’s repaid through monthly installments over a set term, usually between two and seven years. While many lenders offer loan amounts starting at $1,000, you can find a few lenders that will lend you $500. For example, Navy Federal Credit Union offers personal loans as low as $250, with APRs from 8.99% to 18%, depending on your credit, and terms up to 60 months. PenFed offers loans as small as $600, with APRs from 8.49% to 17.99%, and terms up to 60 months.

Compared to other small loan options, personal loans tend to offer longer repayment periods and lower APRs. That said, they can be more difficult to get if you have bad credit. But most lenders offer quick online applications so you can see if you prequalify within minutes (and without hurting your credit score). Just remember that prequalification is not an offer of credit, and when you submit a formal application the lender will conduct a hard credit check, which can temporarily drop your score a few points.

2. Cash advance via an app

In recent years, various cash advance apps have cropped up that let you borrow against your next paycheck. For example, the Dave app offers cash advances of up to $500 to approved users.

Upon approval, you can transfer the advance amount to your bank account for free, or expedite the transfer for a fee. The fees range from $1.99 up to $13.99, depending on the amount you transfer and where you send it. At the time of publication, a $500 instant transfer to a bank debit card through Dave costs $13.99. For a one-week loan, the APR would be 145%.

Cash advance apps can be quick, convenient, affordable, and even free. But the fees, terms, loan amounts, and eligibility requirements vary by provider. Further, the fees can be much higher than equivalent personal loans, from an APR perspective.

3. Cash advance via credit card

Most credit cards allow you to withdraw up to a certain percentage of your credit line in cash through an ATM or bank. The upfront fees are commonly around 2% to 5% of the advance amount. So, a $500 cash advance could cost you $10 to $25 plus interest.

Importantly, cash advances often come with higher APRs that apply immediately and until you pay the amount off in full. For example, if your APR is 30% and you advance $500 plus the $25 fee, you’d pay about $13.10 per month in interest to carry that balance.

Credit card cash advances can be convenient if you already have a credit card with an available balance. That said, the combination of the fee, the ongoing interest charges, and the lack of a payoff date can make them relatively expensive.

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4. Payday alternative loans

Payday alternative loans (PALs) are small, affordable loans offered by federal credit unions. They were designed by the National Credit Union Administration (NCUA) to create an affordable alternative to payday loans.

PALs range from $200 to $1,000 and come with terms of one to six months. Further, the issuing credit unions can only charge fees to cover the actual costs of processing the loan applications, and APRs are capped at 28%.

Some credit unions may require that you're a member for at least a month, but then, you could qualify for up to three PALs during a six-month period.

5. Payday loan

A payday loan refers to a small, short-term loan that you repay from your next paycheck — often within two to four weeks. You can find lenders that offer them online, through brick-and-mortar locations, or both. They typically require you to provide a post-dated check in person or authorize a direct debit repayment from your bank account online.

The typical two-week payday loan comes with a fee of $15 per $100, which is equivalent to an APR of nearly 400%. These loans have been deemed predatory in the past, resulting in many states regulating their maximum loan amounts, loan terms, and finance charges. A handful of states have even prohibited them completely.

Being one of the most expensive ways to borrow, payday loans should be treated as a last resort. However, if you have bad credit, they can be easier to get than other loan types. Approval is often more heavily based on your income than credit, although your credit may be considered.

Where to get a $500 loan

You can find $500 loans from a variety of providers, including:

• Personal loan lenders: A wide variety of personal loan lenders exist, but few offer loans under $1,000. Check out Personify, Oportun, and First Tech for $500 personal loans.
• Payday loan lenders: You can find a variety of reputable payday loan lenders by researching and consulting legitimate reviews on sites like Trustpilot or the Better Business Bureau.
• Cash advance apps: Popular apps offering cash advances up to $500 include EarnIn, Dave, and MoneyLion.
• Credit card providers: Most credit cards allow for cash advances. Shop around and compare rates.
• Federal credit unions: Federal credit unions that belong to the NCUA may offer PALs. Find one near you.

How to qualify for a small personal loan

Common eligibility criteria for obtaining a $500 personal loan include:

• Credit score: You may need to meet minimum credit score requirements. Applicants with FICO scores below 670 (generally the benchmark for good credit) may not qualify, although some lenders cater to borrowers with fair to bad credit.
• Credit report: Lenders often check your credit reports to review your payment history, outstanding debts, and other records. Derogatory marks or high credit utilization rates can result in denials.
• Income: Lenders will check your income amounts, income sources, and payment frequency.
• Employment status: Many lenders require you to be actively employed and will ask about your employment history.
• Valid government ID: You must have a valid identification document from the U.S. government.
• Active bank account: You must have an open and active bank account where the funds can be deposited.

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Time to fund a $500 loan

Here are the funding times you can expect from various providers:

• Personal loan lenders: Many personal loan lenders make approval decisions within minutes and deposit the funds as soon as the next business day.
• Payday loan lenders: Online loans are typically funded the next business day, while in-store loans are funded the same day.
• Cash advance apps: Standard bank transfers can take 2 to 5 business days, while express transfers can be completed in seconds or minutes.
• Credit card providers: Once approved, it can take 5 to 7 business days to receive a credit card in the mail. But cash advances are available same-day once you have a credit card.
• Federal credit unions: Credit unions will vary. Check the details with your credit union of choice.

How much will a $500 personal loan cost?

The cost of a $500 personal loan depends on the following factors:

• Interest rates: Lenders will assign you an interest rate, which determines the percentage of the loan amount that you’ll pay per year in interest.
• Fees: You may also be charged fees for the application, the loan origination, late payments, and more.
• Loan term: The term will determine the amount of interest you have to pay. The longer your repayment period, the more expensive the loan.

When compared over the same loan term of four weeks, the personal loan is significantly cheaper than the payday loan. However, personal loans also give you the option to split up the cost over a longer repayment term. Longer terms make the payments more affordable, but often result in higher overall costs.

See Also: What Credit Score Do I Need to Take Out a Personal Loan?

Alternative options to get $500 fast

Not sure you want to take out a $500 loan? There are other ways to come up with money quickly. For example, you can ask a family member or friend if you can borrow $500. They may lend it to you interest-free and be more flexible with the repayment terms.

Another option is to go through your belongings and see if there’s anything of value you no longer need. You can then sell it via Facebook Marketplace, Craigslist, or a garage sale. You can also look into federal financial assistance programs. If you qualify, the government can help you pay for food, housing, utility bills, and more.

FAQ

How do I choose the best lender for a $500 loan?

To find the best lender for a $500 loan, shop around and apply to see if you prequalify for loans. Upon prequalification, lenders provide you with loan amounts, APRs, fees, and loan terms. Then, you can compare the offers side by side to see which is the best fit for your situation. Prequalification is not an offer of credit, and the final rate you may be offered could be different depending on your credit profile.

Can a $500 loan impact my credit score?

Yes, a $500 loan can impact your credit score. If a lender requires a hard inquiry during the application process, that’ll dock a few points from your credit score. Further, if the lender reports the loan to the consumer credit bureaus, it can impact your credit mix, average account length, and payment history, which are all credit score factors.

Are there any restrictions on how I can use the funds from a $500 loan?

In most cases, lenders aren’t too concerned with how you use the loan funds. There are common restrictions on certain uses, however, such as paying off student loans, gambling, or illegal activities.

Can I get a $500 loan with bad credit or no credit history?

You may be able to get a $500 loan with bad or no credit. If you already have a credit card, you can get a cash advance without any additional credit check. In some cases, cash advance apps don’t require a credit check. Further, payday lenders and some personal loan lenders approve loans despite bad credit.

Learn about the specific type of $500 loan you need:

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