If you’re a freelancer, several short-term loans are available to cover your unexpected expenses, including freelancer cash advances through popular apps like Dave and MoneyLion.
Short-Duration Loans for Self-Employed
Short-term loans for self-employed people are loans provided to individuals who are registered as self-employed; this includes people who earn money through UpWork, Fiverr, Uber, Lyft, TaskRabbit, Etsy, and so much more.
Freelancing has become very popular and lucrative since the COVID-19 pandemic. In fact, in 2023, there are 16.5 million self-employed people in the United States and 4.31 million in the UK. With the strides that have been made in the tech industry in recent years, these figures aren’t surprising. It’s so much easier (and more beneficial) for people to work for themselves.
When you hear about freelancing, people often talk about the more glamorous side – like quitting your nine-to-five job, following your passion, being your own boss, and getting to choose where you work. But what about the not-so-glamorous side of things? There may be moments when clients delay payments, months where income is irregular, and many unforeseen expenses.
We all know it’s important to be prepared for an emergency, but when you’re a freelancer, it can sometimes seem like emergencies strike at the worst possible times. In these situations, freelancers require additional funding to cover their needs. Fortunately, several options for short-duration loans for self-employed are available that cater to the unpredictable nature of your freelancing career.
Types of Short-Term Gig Worker Funding
Since you don’t have a regular stream of income, lenders may view your application for a short-term loan as a greater risk than other applicants. But, there are several options available to help you find a solution to suit your unique situation and needs. The following are four types of short-duration loans for self-employed people.
1) Term Loans
A term loan provides you with a lump sum of cash to cover your expenses, which are repaid with fixed monthly installments. Term loans can be secured, where you would need collateral to secure the loan, or unsecured, where the loan would be based on your income and creditworthiness. Although term loans are a helpful option, they lack the flexibility that freelancers might be looking for with a short-term loan.
2) Revolving Lines of Credit
A revolving line of credit is a type of short-duration loans for self-employed that allows borrowers to repeatedly access credit up to a certain limit as long as they repay the borrowed amount within the agreed timeframe. Simply put, a revolving line of credit allows you to borrow, repay, and then borrow again as long as you remain within the credit limit. Interest on this loan is only paid on what was borrowed.
This type of loan is especially beneficial to freelancers since you’ll likely experience fluctuations in income. The flexibility of a revolving line of credit will provide you with access to income whenever you need it to manage cash flow during leaner times. This type of loan is also beneficial for building credit history. Through consistent, on-time payments, a revolving line of credit will demonstrate your creditworthiness to lenders and improve your likelihood of securing financing in the future.
3) Payday Loans
Payday loans were designed as a financial solution to short-term problems. As the name suggests, these loans are meant to support your expenses between paydays. Payday loans can be approved within a few hours of application, don’t require any collateral, and can be easily accessed with bad credit. Although payday loans can be useful as a form of gig worker funding, given their short repayment periods, high interest rates, and punitive fees, these loans could have the potential to result in a debt cycle.
4) Freelancer Cash Advances
Freelancer cash advances are similar to payday loans; they provide you with an advance on your expected earnings, which you repay once you receive your next paycheck. The terms and fees for cash advances vary based on the lender; however, they’re typically much more affordable than a payday loan.
Cash advances have a convenient application process, with many lenders available online or through an app. They also typically offer flexible repayment terms so you can choose a plan that suits your situation. Cash advances also require no collateral or credit check for approval. While cash advances are beneficial, the charges (including subscription fees, express transaction fees, and tips) may be higher than the APR on an installment loan. Also, with the short repayment period, your credit score could be negatively affected if you’re late or miss a payment.
Best Apps for Freelancer Cash Advances
Cash advance apps have been around since the mid-2010s and have gained popularity recently. According to a survey, in 2022, 33% of Americans now use cash advance apps. But what are they exactly?
A cash advance app is an online service that provides you with cash that you repay from your next paycheck. Some of these apps have fees and charges, while others have a 0% APR. Some apps are offered through a subscription, while others are free to use. The specific terms and rates vary depending on the app you use. Let’s take a look at four of the most popular cash advance apps.
Dave
Dave is an app that offers users cash advances for up to $500 with no interest and no credit check, depending on your eligibility. The Dave app provides you with a Dave spending account and offers opportunities to earn money by completing tasks like surveys. Dave charges a number of fees, including a monthly subscription of $1, express funding fees, and an optional tip. Though repayments for this cash advance are automatic, Dave does not overdraft a customer’s account.
- Maximum advance amount: $500
- Fees: $1 a month subscription fee. Tips are optional. Express fee of $1.99 – $13.99.
- Speed: Transfers take minutes to your Dave spending account and 1 – 3 business days to your bank account
- Repayment period: Your next payday or the Friday after you took the advance
MoneyLion
MoneyLion offers freelancers the opportunity to receive up to $500 through their Instacash feature with no interest, no monthly fee, and no credit check. Funding takes up to five business days to reach your account, or you could opt to pay $8.99 for turbo delivery and receive the cash within minutes.
The MoneyLion Instacash service offers you a $10 cash advance limit at the start, which you can slowly build up to $500 through recurring deposits into your qualifying linked external account. If you choose to subscribe for $19.99 a month, you can unlock access up to $700 in Instacash, and by linking a RoarMoney account with recurring direct deposits, you’re eligible to unlock up to $1000 in Instacash.
- Maximum advance amount: $500
- Fees: Free to use. Tips are optional. Express fee up to $8.99
- Speed: 1 – 5 business days
- Repayment period: Your next payday
EarnIn
With EarnIn, you can receive a cash advance of up to $100 per day and $750 per pay period. With this app, you aren’t expected to pay any fees, but they do offer express funding with fees up to $3.99 and accept optional tips up to $14 per transaction. The EarnIn app doesn’t require you to set up a deposit account, but you would need to maintain a consistent pay schedule with at least $320 in earnings per period. One additional feature this app offers its customers is free credit score monitoring.
- Maximum advance amount: $750 per pay period
- Fees: Free to use. Tips are optional. Express fee of $0.99 – $3.99
- Speed: 1 – 3 business days
- Repayment period: Your next payday
Brigit
The Brigit app offers cash advances between $50 to $250 with no late fees or penalties. Your borrowing limit is determined based on your financial situation, but you can build towards the highest freelancer cash advances over time. With Brigit, if you’re concerned that you will miss a repayment, you can request an extension of your due date. This app also offers you the option to request an additional cash advance if you don’t have sufficient funds in your account to cover the amount owed from your previous advance.
- Maximum advance amount: $250
- Fees: $9.99 a month
- Speed: 1 – 3 business days
- Repayment period: Flexible, you choose your payment date
Final Thoughts
People who are self-employed need to have access to quick and convenient gig worker funding when they really need it, but with their unpredictable payment schedules, it can be challenging to find the right short-term loan to cover their immediate needs.
A term loan will better suit your needs if you need cash to make a large purchase or cover a down payment. For an account that can be used for future emergencies, a revolving line of credit would be the better option for you. But, if you’re expecting an upcoming payment and just need cash until you receive it, a payday loan or cash advance would be the right choice.
Being self-employed can be challenging, but finding funding for emergency expenses doesn’t have to be.
