Mobiloans review: A high-cost line of credit for emergencies

Pros

• Approved lines of credit may be funded by the next business day
• Rewards program may help reduce fees

Cons

• $2,500 max credit line for first-time applicants
• Fees equate to triple-digit APRs
• Confusing fees structure including cash advance fees on top of fixed fees

What you need to know about a Mobiloans line of credit

Mobiloans is a tribal lender and is owned by the Tunica-Biloxi Tribe of Louisiana. It markets itself as an affordable alternative to bank overdraft fees and payday loans.

Here’s what you need to know before you apply.

Fast access to cash

Need emergency cash? If approved, a Mobiloans line of credit could get cash to your bank account quickly.

It takes only a few minutes to apply, and you should find out quickly if you’ve been approved. If you’re approved, you can draw an amount up to your limit to transfer to your checking account as soon as the next business day. One thing to note: The max credit limit for first-time applicants is $2,500.

Flat fees instead of daily APR

Mobiloans tries to differentiate its credit options by emphasizing its flat-fee structure. Mobiloans claims its fees can be less expensive than the average bank overdraft fee.

Depending on your bank and how much cash you need, this may be true. But the math only adds up in your favor if you pay back the total amount you’ve drawn on your Mobiloans line of credit within the first billing cycle, which is about two weeks long.

Here’s how Mobiloans’ fee structure works.

• Cash advance fee — Every time you draw on your line of credit, you’ll be charged a cash advance fee. The cash advance fee you’re charged is relative to the amount you draw. So depending on how much you draw, a single cash advance fee could be less than what your bank charges in overdraft fees, as Mobiloans claims. But cash advance fees add up based on the amount you borrow and whether you make multiple withdrawals.
• Fixed finance charge — If you don’t repay the total amount drawn on your line of credit in the first billing cycle, which is about two weeks long, Mobiloans charges a fixed finance charge. Mobiloans charges this fee for every billing cycle you haven’t repaid your balance in full, and the total fee is determined by how much you still owe on your principal balance. When fixed finance charges add up, things can get out of hand quickly.

Fixed finance charges could lead to a debt trap

Depending on how much you owe, the fixed finance charge on a Mobiloans line of credit will cost $10 to $135 per billing cycle.

This can add up quickly. According to Mobiloans, making minimum payments on a $200 balance would take 13 billing cycles to pay off, and you’d rack up $230 in fees alone. To put the fees into perspective, that’s equal to an annual percentage rate, or APR, of 230.63%, according to our calculations. In this example, the fees add up to more than the total amount borrowed.

It’s possible that the fixed fees — which you’re required to pay each billing cycle — will actually be higher than the minimum payment you’re required to make toward your balance, sinking you further into debt.

Rewards program may help reduce fees

Mobiloans has a rewards program, which may help lower the amount of fees you pay. When you make qualifying payments, you can earn discounts on cash advance fees and fixed finance charges.

Here’s how it works. If you’re enrolled in the rewards program, you earn points for each on-time minimum payment you make, points when you make an additional payment of at least $50, and points when you pay your balance in full.

As you accumulate points, you’ll achieve a series of reward levels which will eventually help reduce your fees.

A 65% discount that comes with Diamond level could save you some money. Getting to Diamond status could drop your overall APR.

But you’re still paying fees each time you make a payment. Plus, if you only make minimum payments to earn points, you’d have to make 160 payments before reaching Diamond status.

A closer look at a Mobiloans line of credit

Here are a few other details you should know about Mobiloans lines of credit.

• Credit check — When you apply for a Mobiloans line of credit, the lender may check your credit, which could lower your credit scores.
• Checking account required — You’ll need an active checking account to apply with Mobiloans, but you can choose to receive payment via a paper check.
• Returned-payment fee — If a payment is returned by your bank, Mobiloans may charge you additional fees.
• No prepayment penalty — You can pay off your balance in full at any time without penalty.

Who is a Mobiloans line of credit good for?

If you don’t think you’ll be able to repay your loan on time, you’ll definitely want to exhaust all other options before choosing Mobiloans. The longer it takes you to repay, the more fees you’ll rack up.

If you’ll need a longer repayment timetable, a payday alternative loan, or PAL, from a federal credit union may be a better option.

Finally, Mobiloans says it may report your payment history to one or more credit bureaus, but it doesn’t make any promises. So if you’re trying to build credit, you might want to look into how a secured credit card could work for you or consider a credit-builder loan instead.

How to apply with Mobiloans

If you decide that a Mobiloans line of credit is right for you, visit its website to see if it operates in your state. If it does, you can apply online. The process is simple and typically takes just a few minutes.

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

• Avant: If you’re looking for multiple repayment options, Avant could be a good choice.
• Earnin: If you want to avoid mandatory fees altogether and need a smaller amount of cash, the Earnin app could help you get a cash advance on your next paycheck.