Fig Loans review: An emergency loan that may help you build credit

Pros

• May help you build credit
• No prepayment penalty

Cons

• High interest rates
• May be charged a fee for debit card payments
• Not available in most states

What you need to know about Fig loans

Fig is a Houston-based company that got its start partnering with Houston’s United Way branch. The company says it aims to provide a better alternative to payday loans and help people improve their credit.

Fig offers two types of consumer loans: a personal loan it refers to as the “Fig Loan” and a credit-builder loan. Fig reports both types of loans to the three major consumer credit bureaus, which may help you build credit over time if you make payments as agreed.

Here’s some more info about Fig loans.

Credit-building loans

Fig’s personal loans — which it recommends for emergency needs — range from $300 to $750 with loan terms of four months to six months. Fig says it may give you a discount if you pay back your loan early.

Credit-builder loans, like secured credit cards, can help you build credit. So if you have no credit or bad credit, a credit-builder loan can be a good option. With the Fig credit-builder loan, you’ll make payments into a savings account for a year. At the end of the year, you’ll receive back all of the money you paid into the account — also known as the principal. And as long as you make on-time payments, you’ll build your credit history.

While Fig says it won’t look at your credit scores when you apply, the company will analyze other factors such as income and existing loans. Fig loans are available only in the following states: Florida, Illinois, Missouri, Ohio, Texas and Utah.

High interest rates

If you take out a personal loan from Fig, you’ll have to settle for a high APR in the triple digits. Fig’s loans are very expensive — and APRs that high can trap you in a cycle of debt if you can’t afford repayments. Unless you’re able to pay it back right away, a Fig loan may hurt your finances.

Potential debit card payment fee

You can use your debit card to pay back your Fig loan. But if you go this route, you’ll have to pay a processing fee. To avoid the fee, you can set up automatic withdrawals from your bank account instead.

A closer look at a Fig personal loan

Here are some more details to consider before deciding if a Fig loan is a good option for you.

• No late fees — Fig doesn’t charge late fees for its credit-builder loans. But if you have a payment that’s about to be 30 days overdue, it will close your loan and refund the principal you’ve already paid, minus any interest owed on your past-due payment. That allows Fig to report your loan as a closed account instead of a delinquent one.
• Credit-builder loan fee — If you take out a credit-builder loan, you’ll have to pay a one-time account-opening fee.

Should I get a Fig loan?

Fig personal loans have high annual percentage rates, or APRs, so you should look for other options if possible. So if your car breaks down and you have to cover repair costs, you may be better off using a credit card with a lower APR. Or if you have to pay for a medical treatment, ask if the doctor offers low-interest payment plans.

If you don’t have another option, a Fig loan may be a better choice than a payday loan or title loan. You’ll pay a lower APR than a typical payday loan, and you won’t put your vehicle at risk like you would with a title loan.

But this type of high-interest loan still only makes sense as a last resort.

And if you’re considering Fig’s credit-builder loan, consider whether a secured credit card may make more sense for your financial goals.

How to apply with Fig

To apply for a Fig loan, you’ll need to live in one of the six states it services, and have a bank account with at least three months of transaction history, income deposits of at least $1,400 a month, and a positive account balance at the time of application. You also must get your paychecks via direct deposit.

Once you apply online, you’ll have to provide some personal information.

• Name
• Birth date
• Phone number
• Address
• Email address

Before you apply with Fig loans, look at other lenders that may have lower APRs, which can make your loan more affordable.

Not sure if Fig is right for you? Consider these alternatives.

• Dave: If you don’t mind a small monthly membership fee, you can apply for a no-interest cash advance from Dave for up to $100.
• Oportun: You may want to consider an Oportun personal loan if you want to take out a larger loan.