Bank of America Balance Assist Small-Dollar Loan Review

Bank of America’s small-dollar loan, Balance Assist, allows customers to borrow up to $500 for a flat $5 fee. Then, the loan is repaid in three equal monthly payments.

To be eligible for Balance Assist, you must be a Bank of America customer with a checking account that’s been open for at least a year. Customers can apply online and have the money within minutes, according to the lender.

Bank of America is part of a small list of mainstream banks that offer short-term loans as alternatives to high-interest payday loans. Though these loans are a quick and convenient way for customers to handle emergency expenses, some carry high interest rates.

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Bank of America Balance Assist at a glance

Bank of America Balance Assist loan requirements

To apply for Balance Assist, you must have a Bank of America checking account that’s at least one year old, or two and a half years old if you don’t have a credit score. You should also have a positive balance in all Bank of America checking accounts that you own or co-own and a history of regular monthly deposits.

You can apply for a Balance Assist loan through Bank of America’s website or mobile app. Approval is based on your relationship with the bank and credit-based factors. This likely includes your credit score and credit history, though Bank of America doesn’t disclose a minimum credit score requirement for Balance Assist.

You can take out one Balance Assist loan at a time, but you cannot take out more than six Balance Assist loans in a 12-month period.

As part of the application, Bank of America will conduct a hard credit inquiry, which is standard for most loan approvals. This can lower your credit score by a few points and stay on your credit report for about two years.

According to the lender, applicants should have the money in their account within minutes of being approved. If your request is denied, you’ll receive an email within two business days that explains why your application was rejected.

Bank of America Balance Assist loan costs

The Balance Assist loan carries a $5 fee, no matter how much you borrow. This means the annual percentage rate will vary based on the loan amount.

For example, if you borrow the minimum of $100, the loan will carry a 29.76% APR. If you borrow the full $500, it will carry a 5.99% APR.

Balance Assist is a significantly cheaper option than a payday loan, which can carry an average APR of almost 400%. The three-month repayment term is also longer than the two-week repayment term offered by most payday lenders.

There are no fees for paying off your loan early or late fees for missing a payment. The lender also adjusts the overdraft setting on whatever checking account is tied to your Balance Assist loan so you avoid accidental overdraft fees. However, missed payments will be reported to the credit bureaus (Experian, Equifax and TransUnion), which could hurt your credit score.

Loan example: A $400 loan with an APR of 7.5% repaid over three months would carry:

• Total interest: $5.

• Total amount due: $405.

• Monthly payments: $135.

How Bank of America Balance Assist loan compares

Even with a $100 loan, Balance Assist rates don't exceed 36%, which most consumer advocates consider to be the maximum limit for a loan to be affordable.

Several other major banks offer short-term, small-dollar loans to existing clients for a flat fee. For example, U.S. Bank Simple Loans are available in amounts ranging from $100 to $1,000.

Other options for small-dollar loans include personal loans from credit unions, which may be especially affordable for borrowers with fair or bad credit scores. Credit unions tend to offer lower interest rates, flexible terms and more lenient criteria for applicants, and many have a small minimum loan amount. You will need to become a member before applying.

Some online lenders cater specifically to applicants with bad credit or no credit history, but the loans will likely carry a higher APR than Balance Assist. These loan amounts tend to start at $1,000, and many offer same- or next-day funding.

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Bank of America Balance Assist isn't a good idea if:

• You're trying to build credit: Though Bank of America reports your Balance Assist payments to the credit bureaus, there are more reliable ways to build credit over a longer repayment term, including a secured credit card (which Bank of America offers) or a credit-builder loan. If you don't know your credit score, check it for free on NerdWallet.

• You struggle to budget: The $5 fee may be affordable for most customers, but a loan isn’t affordable if you ultimately can’t make the monthly payments. Add the three installments to your budget before applying to ensure you can comfortably repay the loan over the 90-day period.

• You can get cash elsewhere: Paying with cash is always cheaper, even if the cost to borrow isn't high. Consider ways to earn extra money before opting to borrow from a lender.

• You need to borrow a larger amount: The maximum Balance Assist loan amount is $500, and you can only have one Bank of America small-dollar loan at a time. If you need to borrow more money, many traditional banks, credit unions and online lenders offer loans ranging from $1,000 to $50,000 or more.

Alternatives to Bank of America Balance Assist

Here are some more alternatives that may be cheaper than Balance Assist.