Short answer: without a bank account you can still be paid a loan by check, in cash or on a prepaid card, but each route can add fees, and offers that pay out in cash can be high-cost payday or title loans. Opening a low-cost account first can make borrowing and repaying cheaper.
How a loan is paid out and repaid
For payday loans, the CFPB says the money can be given in cash, by check, through an electronic deposit or on a prepaid card, and repayment is generally by a post-dated check or an authorization to debit a bank, credit union or prepaid card account (CFPB). Online lenders may not take a check and may ask you to authorize automatic electronic payments from your bank account (CFPB).
A lender may not make automatic electronic payments a condition of a loan, apart from overdraft lines and a few other exceptions (12 CFR 1005.10(e)). Ask what other ways to pay it accepts. The autopay discount guide and the guide to stopping automatic payments cover the rest.
Options without an account, and their fees
- Loan paid by check: a bank or credit union does not have to cash a check for you, and it might charge a fee if you have no account with it. Some offer fee-based check cashing to non-customers (CFPB).
- Loan paid to a prepaid card: fees vary by card. Before you buy, the packaging must list fees such as the monthly fee, per purchase fee, ATM withdrawal fees and cash reload fee (12 CFR 1005.18(b), CFPB).
- Paying by money order or in cash: ask the lender which payment methods it accepts, and keep every receipt.
Offers that pay out in cash
A payday loan can be paid in cash (CFPB), and a title loan uses your car as collateral (CFPB). If an offer pays cash on the spot and asks for a post-dated check, account access or your car title, read the payday loan guide and the title loan guide before you sign, and compare it by APR with any other offer.
Example: what the fees can add up to
This example uses made-up fee amounts to show the math; real fees differ by place and card, so use the ones you are quoted. It covers only the fees for getting and moving the money, not the loan's interest.
| Route | Fees in the example | Total over 12 months |
|---|---|---|
| A. $1,000 paid by check, 12 payments by money order | 2% check cashing fee = $20.00; $1.50 per money order x 12 = $18.00 | $38.00 |
| B. $1,000 paid to a prepaid card, 12 cash reloads to pay | $5.00 monthly fee x 12 = $60.00; $3.95 cash reload x 12 = $47.40 | $107.40 |
In route A, $20.00 + $18.00 = $38.00. In route B, $60.00 + $47.40 = $107.40. Both are on top of the APR, so add them when you compare offers.
Opening a low-cost account first
The FDIC says a bank deposit account can save you check cashing fees, that depositing checks at a bank is free, and that paying bills can be cheaper without money orders (FDIC). Some banks and credit unions offer low-risk accounts that do not allow overdrafts; transactions over your balance are declined instead. Some carry a monthly fee, and some banks do not make them easy to find, so ask for one by name (CFPB). Bank On is a national effort that works for access to safe, affordable bank and credit union accounts (Bank On).
The FDIC calls a deposit account a first step that can lead to other financial products (FDIC). For building credit, see the credit builder loan guide and the credit union guide.
Questions to ask a lender
- How will you pay out the loan, and is there a fee for that method?
- Which payment methods do you accept besides automatic withdrawals?
- What is the APR, is there an origination fee, and what is the total of payments?
This guide explains federal rules in general terms and is not legal advice.
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Sources
- CFPB: What is a payday loan?
- CFPB: What should I consider if I'm thinking about getting a payday loan online?
- Regulation E, 12 CFR 1005.10(e): compulsory use of electronic fund transfers
- CFPB: Can I cash a check at any bank or credit union?
- Regulation E, 12 CFR 1005.18(b): prepaid account disclosures before acquisition
- CFPB: How do I shop for and buy a prepaid card?
- FDIC: Get Banked
- CFPB: What is a low-risk bank account and who is it for?
- Bank On (Cities for Financial Empowerment Fund)
- CFPB: Single-Payment Vehicle Title Lending (report, May 2016)
Disclosure: Modern Lending Solutions is not a lender, loan broker or agent for any lender or loan broker, and does not make credit decisions. Any compensation we receive is paid by participating lenders, only for advertising services. This guide is general information, not financial or legal advice.