Personal Finance News
Chime Rolls Out New Instant Loans Feature
The popular neobank Chime is introducing a new feature that will provide customers with quick access to extra funds.
About Instant Loans:
This week, Chime announced the launch of Instant Loans. With this option, customers will be able to borrow up to $500 with a fixed interest rate. Plus, rather than requiring a credit check to qualify, Chime utilizes other data sources to determine eligibility. In fact, the neobank notes that making on-time Instant Loan payments can help users build credit.
Instant Loans will be offered to pre-approved Chime users who receive direct deposits to their Chime checking accounts. While customers may eventually be able to access up to $500 loan, initial loans start at $100.
As for fees, Chime applies a finance charge of 5% — so $5 per $100 borrowed. For example, if a customer borrowed $100, they’ll pay $35 per month for three months, meaning they’d pay a total of $105. This works out to a 29.76% annual percentage rate. According to Chime, users can pay off their loans early to pay less in interest.
Also notable is that Chime reports Instant Loan payments to credit bureaus. In a press release, citing an Experian simulation, Chime estimates that customers who pay on time may see their credit scores increase by 10 to 30 points.
The new Instant Loans feature is separate from Chime’s MyPay feature, which was introduced last year. That option allows eligible customers to access funds before payday for a small fee. It’s also different from SpotMe, which allows users to slightly overdraft their accounts without incurring a fee. Interestingly, as of 2024, SpotMe has covered more than $30 billion in customer transactions.
What They’re Saying:
Announcing the debut of Instant Loans, Chime’s Chief Product Officer Madhu Muthukumar said, “We are relentlessly focused on helping everyday people achieve financial progress. Our members have told us that they want simple and transparent tools to access money when they need it, and to help them build credit — and we’re excited Instant Loans provides both to our members.”
My Thoughts:
The first thing I want to point out is a confusing element of Chime’s announcement. Here’s the direct quote: “Chime’s Instant Loans has no late fees or compound interest, just a fixed interest rate of $5 per month for every $100 borrowed.” However, it goes on to say that it’s paid in three monthly payments of $35 per $100 borrowed. That’s a total fee of $5, not $5 a month. I’m not sure what’s behind this discrepancy, but it is confusing.
On to the product itself, as I’ve said when similar offerings — such as Varo Bank’s Advance option — have popped up, I do have mixed feelings. Overall, I am glad that customers will have easier access to funds as this can help them avoid worse options. At the same time, though, I sincerely hope that users aren’t relying on these features as the fees can still add up.
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