U.S. Bank Simple Loan: 2020 Review

When to consider: If you're an existing bank customer in need of a small loan.

U.S. Bank became the first mainstream bank to offer small-dollar loans as an alternative to online or storefront payday loans in 2018. The Simple Loan is a short-term loan repaid with three monthly installments. It's available to customers who have U.S. Bank checking accounts.

U.S. Bank's Simple Loan is a fast way to handle emergency expenses of $1,000 or less if you have bad credit (below 630 FICO) or no credit history.

The bank dropped this loan's annual percentage rate from 71% to 35.65% in response to the economic fallout caused by the COVID-19 crisis. It's one of few lenders to change its loan offering at the beginning of the crisis.

That rate falls just below the 36% cap consumer advocates and financial experts recommend lenders put on APRs.

»MORE: Try these alternatives before turning to a payday loan

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 $6 for every $100 borrowed, which translates into an annual percentage rate of 35.65%. That’s much cheaper than typical payday loans, where the average rate is 391%, and it’s repaid over three months, not the two-week cycle that is common of payday loans. There are no origination fees, late fees, missed-payment fees or prepayment penalties.

Loan example: A $500 loan with a repayment term of three months at 35.65% APR would carry:

• Monthly payments: $176.67.

• Total interest: $30.

• Total amount due with autopay: $530.

The bank also offers another personal loan and lines of credit for larger amounts with longer repayment periods.

How U.S. Bank Simple Loan 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 67%. It makes loans at physical locations as well as online, and does not conduct a hard credit pull.

Other online lenders that offer alternatives to payday loans, such as LendUp and Rise, have much higher rates.

U.S. Bank Simple Loan 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. Take the quiz below to explore your options:

Before you take a Simple Loan

1. 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.

2. 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 Simple Loan