If you urgently need access to a certain amount of money, then the most convenient option would be one of the types of loans. Flex loans are easy to get with absolutely any credit history, but they involve fairly high interest rates. Read this article to understand what a flex lending is.

A flex loan is a type of long-term lending, in which money is given to the client in installments (tranches) over a certain period of time. A flex loan allows the borrower to manage money within the amount specified in the agreement with the lender. In addition, the client has the opportunity to use a loan on more flexible terms. If borrowed funds are not used, then no interest is charged on them. The debt must be repaid after the client has received the loan.

If you compare a payday loan with a flex loan, then they differ significantly in their essence. Flexible loans are more like credit cards and are unsecured personal loans that you can get from $100 to several thousand dollars. This type of loan is more expensive than a regular credit card, but it can be used by customers without a credit check.

This fact is one of the main advantages of flexible credit. If you are in urgent need of funds to pay for repairs, travel or medical bills, and the bank is turning you down due to bad credit, then flexible loans are the perfect way out.

Usually, flexible loans are provided by various non-bank organizations and lenders. If you see an announcement that a bank is offering flexible lending, it is most likely just a personal loan, since banks do not provide such an option as a flex loan.

How do Flex Loans work?

If you have made a decision to apply for a flexible loan and have received a positive response, then lender will provide you with access to a line of credit. You can use the funds as much as you need, and at the end of each month, pay the installment until you fully pay off the lender. The method of payment depends only on your convenience: you can pay the whole amount, half or a minimum. You just need to remember that the more installments, the higher the interest rate on them.

It is worth noting that even if you find an offer without additional fees, the interest rates for this type of loan are still quite high compared to others, so be sure to take the time to find the best lander.

Flex loan agreement

The agreement under which a flex loan is issued is an important document. It regulates the terms of interaction between the borrower and the lender. For the borrower, the amount of debt, the loan rate and the period for which the contract is concluded are individually calculated. The maximum possible amount of money or debt limit is also indicated. If the amount of available funds is limited to a certain amount, then you will not be able to deduct a dollar more from the account. When depositing funds, it is impossible to increase the limit; it will not be possible to use the loan again without concluding a new agreement. If the client has a maximum debt limit, the issuance of loans will be suspended when the critical amount of debt is reached. As soon as at least some of the funds are deposited, the limit will increase by that amount and will be available again. Accordingly, when paying off the entire debt, the client will be able to use the entire limit again.

Repayment of the flex loan

The agreement of the flex loan regulates the conditions under which the debt will be repaid. There is a general rule: a certain percentage of the actual debt must be paid into the account every month. Interest is charged on the amount used by the client. The debt must be paid in full by the time the contract ends.

Payday Loan VS Flex Loan

A flex loan is issued for the amount from $100 to several thousands with the APR (annual percentage rate) 200%. Such APR is considered quite high, but still less than in the case of payday loans - up to 400%. Payday loans, unlike flex loans, are short-term and are issued for up to 60 days.

How to borrow?

To get a flex loan, it is usually enough to register on the website of the selected lender and submit an application. The customer immediately selects the limit amount and possibly the period in which he wants to use the money. It is worth adding that such a period (usually one year) is often imposed in advance. Then the application is sent to the loan company, where it is analyzed.

After accepting the application, the customer receives information about the loan limit granted to him. If he decides to use it and accepts the terms of the contract, he will be able to make his first withdrawal from flex loan. For this purpose, you will usually need to log into the customer account created during registration and select the amount to be withdrawn. After confirming the selection, the payment made by the customer will go to his bank account.

However, it will not always be possible to withdraw all available funds immediately. Some companies do not allow customers to take more than 50% of the limit on their first payout.

However, the borrower can make withdrawals whenever he needs money. The funds are at his disposal at all times.

Pros and Cons of Flex Loans

Pros of flex loans
  • saving time: you can conclude a long-term cooperation agreement with a financial institution in advance, and use the funds only when necessary;  
  • the ability to pay only the interest that was accrued on the amount actually used; 
  • the absence of a rigid payment schedule, the contract specifies the period during which the loan must be repaid;  
  • the possibility of increasing working capital with the help of a flex loan;  
  • the ability to extend the term of the contract and increase the limit, for this you just need to fulfill the agreement with the bank.
Cons of flex loans
  • But there are also disadvantages. If the borrower does not properly fulfill his obligations to the lender, the flex loan can be closed at any time.
  • Additional fees may increase the cost of the loan, and it will be higher than that of a personal loan.
  • To take advantage of this type of financing, the client must be responsible and disciplined.
  • If you have a flex loan, but do not use it, the lender may issue a fine or block the account altogether.
  • Also, if a technical overdraft is formed on the flex loan account, the lender will charge a commission for it.