When to consider: In a true emergency after you’ve explored other options
U.S. Bank became the first mainstream bank to offer small loans as an alternative to payday loans in 2018. The Simple Loan is a short-term loan available to customers who have U.S. Bank checking accounts.
This loan carries much lower rates than traditional payday loans, but it is still an expensive form of credit when you need quick cash. NerdWallet recommends exploring your alternatives before taking it.
U.S. Bank rates and terms
|Loan amounts||$100 to $1,000|
|APR||71% or 88%|
|Soft credit check?||No|
|Repayment schedule||Monthly over 3 months|
|Time to funding||Same day to next business day|
|Payment flexibility options||Choose your payment date upon approval|
U.S. Bank personal loan review
U.S. Bank makes short-term personal loans that cost less than what you’d find at an online or storefront payday lender. It is the first large national bank to bring back payday-style loans after the financial crisis, when most banks stopped lending to poor-credit customers.
The loan is designed for existing U.S. Bank customers who have trouble coming up with money for unexpected expenses or short-term needs, according to the bank’s press release.
Qualification: To qualify, you have to be a U.S. Bank checking account customer for at least six months and have your paychecks directly deposited into your account for at least three months. You can take one loan at a time, and you cannot take another loan for 30 days after the first one has been paid off. With payday loans, there is no “cooling off” period between loans; lenders allow borrowers to roll their loans over for a fee, which often leads to a cycle of increasing debt.
U.S. Bank conducts a hard pull of your credit when you apply, which can temporarily ding your credit score.
Cost: The Simple Loan costs $12 for every $100 borrowed, which translates into an annual percentage rate of 71%. That’s much cheaper than typical payday loans, where the average rate is 391%, and it’s due after three months, not the two-week cycle that is common of payday loans.
Auto-pay discount: U.S. Bank allows both auto-payments and manual payments. Manual payments cost extra, $15 per $100 borrowed, which is equal to 88% APR.
Payments are reported to the credit bureaus, so your score can increase if you make on-time payments.
Loan example: A $500 loan with a repayment term of 3 months at 71% APR would carry:
- Monthly payments: $186.67
- Total interest: $60
- Total amount due with autopay: $560
- Total amount due without autopay: $575
The bank also offers regular personal loans and lines of credit for larger amounts with longer repayment periods.
How U.S. Bank compares
U.S. Bank’s loan rate is slightly higher than Oportun, a payday alternative lender that lends to people with low credit scores or no credit history. Oportun’s rates top out at 66%. It makes loans at physical locations as well as online, and does not conduct a hard credit pull (which can ding your credit score).
U.S. Bank is not a good idea if:
- You are trying to build credit: A secured credit card, credit-builder loan or paying off existing debt are faster and cheaper ways to build credit. See ways to build credit, and if you do not know your score, get your free credit score on NerdWallet.
- You can get cash elsewhere: NerdWallet recommends exhausting cheaper alternatives first, even in an emergency:
|Alternatives to high-interest loans|
|1. Ask family and friends for a loan through lending circles or a loan agreement.|
|2. Seek assistance from local nonprofits, charities and religious organizations.|
|3. Get a payday alternative loan from a credit union.|
|4. Ask your employer for a paycheck advance or use an app like Earnin.|
|5. Get a pawnshop loan secured by something you own.|
|6. Try other ways to make money.|
Before you take a U.S. Bank loan
- Try all other options: If none of the alternatives listed above work for you, see if you can buy time from your creditor, work out a payment plan or face the short-term financial consequences of not paying, such as a late fee.
- Compare the cost of taking the loan to the cost of not taking it: Calculate the overall cost of not having funds for your purpose, then weigh that against the typical cost of a Simple Loan in your state.
If you take a U.S. Bank loan
If you decide to take a Simple Loan, carve out room in your budget to pay the loan off as soon as you can to save on interest charges. These loans may be much cheaper than payday lenders, but are still too expensive to be a long-term or repeat solution for your finances.