What Are Money-Borrowing Apps and How Do They Work? (2024 Guide)

Money-borrowing apps, also known as loan apps, help users seamlessly borrow money from other individuals or organizations. These apps streamline the borrowing process, from loan application to repayment, to help provide quick, convenient access to cover expenses and emergencies. While the accessibility and speed of online payments may be appealing, users should approach this option carefully and clearly understand the terms and conditions.

Borrowers have several options for money loan apps, with notable examples including Brigit, Earnin, MoneyLion, Chime and Albert. 

Brigit is a money cash-advance app that provides zero-interest money loans for up to $250. Customers here can access this instant cash and other premium features with a $9.99 monthly subscription fee. 

Earnin offers zero-interest advances capped at $750 per pay period. Borrowers can receive funds on this app within three days, or pay a small fee for an instant transfer, known as instacash. 

MoneyLion is another financial services app that loans users up to $500 in instant cash at 0% interest. Funds can be delivered in up to five days, or instantly for a fee. Select users may also qualify for up to $1,000 in cash advances.

Chime allows users access up to $200 to cover overdrafts, a feature called SpotMe. Users can also temporarily boost the SpotMe limits for their friends by $5, up to four per month. Chime will prompt you to pay an optional tip after your next paycheck.

Albert provides their users access to $250 fee-free instant overdraft protection. Funds here are delivered as an advance on their Albert cash debit card. Access to this feature requires a $14.99 monthly subscription.

It’s worth noting that each app offers different repayment date options. Some apps may provide the required repayment date, while others allow flexibility and due dates beyond your next paycheck.

While money-borrowing apps are convenient to use, it’s important to be aware of their potential disadvantages. Here are some factors to consider before using a money-borrowing app.

Pros and Cons of Money-Borrowing Apps

Money-borrowing apps provide a hassle-free alternative to traditional personal loans, offering a convenient way to receive funds through your smartphone, sometimes in a matter of hours. Here’s how to choose and secure a loan through a money-borrowing app.

Research and Select the Right App

When choosing a money-borrowing app, thoroughly review your options by researching and comparing various apps on the market. Look at the user reviews and ratings to understand overall customer satisfaction. 

Look into the terms and conditions of each app. Be sure you understand and fully agree with the fee structure and repayment timelines. If you have any questions or don’t understand, you can reach out to a financial expert or lender for support.

Also, consider the maximum loan amount of the apps since you’ll need to choose one that can cover your current financial needs. Be sure you can comfortably repay the loan amount without causing unnecessary financial hardships later down the road. Borrowing from a money app should ease a financial burden and not contribute to ongoing difficulties.

Create an Account and Link Your Bank

When you’ve decided on the right money-borrowing app for your personal financial situation, it’s time to set it up on your phone for seamless access. You can simply go to the app store on your device, locate the app and proceed to download and install.

Next, you’ll need to set up your account and link it to your existing financial institution. This connection provides seamless financial transactions between your accounts and enables you to use any helpful app features. 

For security reasons, you’ll probably need to verify your information to request a money-borrowing loan and use other app features. Expect this process to include providing a photo of your government-issued ID, income verification and requesting personally identifiable information. Having these items on hand with your bank account information will help you get your account up and running in no time.

Set Up Direct Deposit and Notifications

Setting up the direct deposit feature helps speed up access to your funds, rather than having to rely on a physical check. In the app’s account settings, look for an option related to direct deposits or linking to an employer. 

When you’re finished setting up your direct deposit, consider enabling certain notifications for important updates, deposit receipts and repayment schedules and reminders. You can often customize these alerts to be received through your preferred platform, whether by email, text or an in-app message. These notifications provide up-to-date information on your financial transactions and can help you meet payment deadlines, allowing you to maintain a positive borrowing experience.

Apply for and Receive a Loan

Money-borrowing apps tend to provide borrowers with a user-friendly experience. After logging into the app, you’ll need to follow the application instructions for a loan. Navigate to the menu to search for options for instant cash or similar terms. Be prepared to share details such as your income, employment status and desired loan amount. In some cases, you may need to authorize a credit check.

In most cases, this will be a soft credit check, which does not impact your credit score. However, the app may require a hard check, which is a request for credit that will temporarily lower your score.

After submitting your loan application, you’ll receive prompt notice of whether you meet the eligibility requirements and you’ll get an expected date for depositing funds into your account. The lender may also provide you with an option to pay an express fee for the expedited processing of your funds. Be sure to carefully review all terms and conditions to understand interest rates, repayment due date and any associated fees.

When does it make sense to use a loan from a borrowing app? Money apps may be a helpful option to get same-day funds when faced with unexpected expenses or experiencing temporary financial hardship. For example, it can be a valuable resource when dealing with a surprise medical bill or needing to bridge the gap between paydays. It can also help you avoid overdraft fees or late payment fees on credit cards or other bills.

While a quick loan can be a lifesaver during hardships, it’s not always the most suitable option. Avoid using a money-borrowing app loan to plan for repeat expenses, such as cell phone bills or groceries. Also, don’t rely on these loans for indulgent purchases or items you haven’t budgeted for.

Responsible budgeting and financial planning should always be your primary approach. Money-borrowing apps should be considered a last resort when unexpected emergencies disrupt your carefully outlined plans.

A considerable risk with using a money-borrowing app is the consequences of missing payments. Depending on the terms, apps may add late fees, increase your interest rate, or both. Late or missed payments can also impact your credit score, making it challenging to borrow again in the future.

To avoid late or missed payments, use the app notification setting to keep track of your repayment options. As soon as you foresee repayment challenges, be sure to reach out to your lender’s customer service department for assistance. Apps may have options for granting extensions or approving a payment plan to help you get back on track.

When you’re looking for quick access to funds, it’s important to consider your options beyond money-borrowing apps. Other alternatives include credit union loans, secured loans or loans from friends and family. We’ll provide a few insights into what they are and why they may be a better alternative to a money-borrowing app loan.

Credit Union Loans

Credit union loans are an option for borrowers who are members of the institution. As a not-for-profit financial institution that is also member-owned, borrowers often have more favorable lending options than traditional banks. This includes significantly reduced interest rates, which decrease the overall cost of the loan, and extended repayment options to reduce monthly payments.

Secured Loans

Secured loans also offer several advantages for borrowers. These loans are backed by some type of collateral, such as a home or a car.  Because these reduce lending risk, secured loans often boast comparatively lower interest rates and lower monthly payments due to their longer repayment periods.

Many banks offer membership programs to access these loans where becoming a member grants access to these exclusive loan products and better rates. You can also gain access to personalized customer support and other services that can improve your borrowing experience.

Friends and Family Loans

Borrowing short-term loans from loved ones is another option for quick access to additional funds. The main advantage of a friends and family loan is the flexibility and leniency in terms. Repayment requirements may be flexible and negotiable, and compared to traditional loans, there’s less formal processing and likely no application needed.

However, borrowing from a loved one has to be managed carefully to avoid straining relationships. Be sure to establish clear expectations and put everything in writing to avoid misunderstandings on either end. Regularly check in with your friend or family member on your repayment progress. Mutual trust, respect and transparency will go a long way to help you maintain relationships while using this loan option.

Money-borrowing apps have emerged as a convenient option for accessing small sums of money to help address temporary financial challenges. Prudence in financial planning is important, but unexpected expenses may overwhelm even the best of times. Quick access to cash, especially fee-free options, is helpful in times of need.

However, while these apps offer quick solutions, it’s important to be aware of their drawbacks, such as high interest rates, which can lead to increasing hardships. Borrowers may consider helpful alternatives to money-borrowing apps including lower-interest personal loans from credit unions or secured loans that use collateral to reduce lender risk. You can also consider asking friends and family for loans, which may provide low or zero interest, higher limits, less hassle and even lower monthly payments. 

Overall, when considering a personal loan, always evaluate your needs, explore various options and get clear on the fee structure, repayment schedule and other associated loan terms and conditions. This proactive approach will help you maximize borrowing while minimizing risks, ultimately contributing to your financial stability in the long run.

Editor’s Note: Before making significant financial decisions, consider reviewing your options with someone you trust, such as a financial adviser, credit counselor or financial professional, since every person’s situation and needs are different.