loans for uber drivers

With the arrival of ride-sharing apps like Uber, many people have become their own bosses, as independent drivers. In fact, according to PYMNTS, it’s predicted that by the year 2028 rideshare drivers will make up nearly 50% of the United State’s workforce.1 However, the changes that we have all made to the ways we work, live, and play have disrupted the incomes of Uber drivers and many other groups of gig workers. Just like any other group of people, Uber drivers and gig workers need to know where they can look to find installment loans.  

In this article, we’ll look at some options for personal loans for Uber drivers and other types of self-employed individuals to recover from the pandemic and get back to making a living on their terms. Read on to learn more about loans for uber drivers! 

Get To Know Your Credit Score

Before anyone looks for personal loans, they should first understand what shape their financial profile is in—specifically, their credit report and credit score.  

A credit report is a consumer’s financial profile. It considers a person’s spending habits, relationship with lenders, and history of managing debt to create an account that calculates a FICO score, named for Fair Isaac Company. This credit bureau essentially invented the modern credit scores. So when someone mentions their credit score, chances are they are talking about their FICO score.

To get your score, your credit report analyzes you using the five factors listed below, ordered in the weight of their impact from greatest to least.

Credit Score Factors

Payment History – The record of all the late and on-time payments to the business you owe money to. Late payments are reported to the credit bureau and heavily affect your score. 

Credit Utilization – The ratio of the amount of credit you’re using to the amount of credit available to you. For example, if you have a balance of $200 on a credit card with a limit of $1,000, then your credit utilization is 20%. Keep yours to 30% and below to maintain a decent credit score.  

Credit History – The complete list of all of your past and current credit accounts. A long, positive history shows experience with credit over a long time. If you have had good credit in the past, lenders can believe that you will continue that path.

Credit Mix – A variety of different credit accounts (like car payments and mortgages) can show that you can handle other payment structures.  

New Credit – Hard inquiries for credit applications can affect your score. When looking for a loan, try to avoid applying for any new credit accounts.  

If you have ever owned or rented a place to live, bought a car, paid a utility bill, or applied for a credit card or a personal loan, you have a credit report and credit score available.  

People with good credit scores have many options for personal loans that carry a lower interest rate and longer loan terms (i.e., more time to repay the loan). However, while having bad credit can decrease those kinds of choices, it doesn’t mean that an Uber driver can’t find a personal loan that works for them. So let’s take a look at some private loan options that can work for almost any type of credit score. 

Comparing Loans for Uber Drivers

Loan TypeTypical Interest RateCollateral Required Loan TermIdeal For
Cash AdvanceHIGH (20%-40%)NoShort (weeks to months)Immediate, short-term needs
Personal Loan (unsecured)Moderate (5%-20%)NoMedium to long (months to years)Borrowers with good credit seeking flexibility 
Bad Credit LoanHIGH (15-30%)SometimesVariesBorrowers with poor credit history 
Car loanLow to moderate (3%-15%)Yes (vehicle)Medium (years)Purchasing or upgrading vehicles for ridesharing 
Credit Union Loan Low to moderate (3%-12%)VariesVariesBorrowers seeking personalized service & flexibility 

Keep in mind that specific interest rates, terms, loan amounts, and other loan details can vary widely depending on the state you live in, your credit history, etc. 

Can an Uber Driver Get a Payday Loan?

Payday loans are one of the fastest ways an Uber driver can get the cash they need. With thousands of payday loan lenders available in brick-and-mortar locations as well as online, an Uber driver can apply for a payday loan 24 hours a day, seven days a week. But beware of the dangers of payday loans. They’re very risky financial solutions that could lead to even more trouble in the future.

A payday loan, sometimes called a cash advance loan, is a type of short term loan. For Uber drivers and other gig workers, income can be affected by many factors, which means that some weeks can bring in more revenue than others. Payday loans advertise speed and convenience but the high interest rates and short repayment periods make them difficult to pay back.

Payday loans work like this: 

  1. A borrower visits a payday loan lender to fill out an application. 
  2. If the lender approves their loan application, they write a check for the amount they want to borrow, plus the interest and fees. 
  3. The lender gives the borrower the loan amount and then waits to cash the check on or after the next payday.

With an online payday loan lender, the whole process would be done electronically, with the borrower providing banking information to authorize automatic deposits and withdrawals. With both options, payday loans are processed far faster than a traditional loan from a bank. Depending on the lender they choose, borrowers can apply for a payday loan and receive funding in their bank account, all within a day.

A typical payday loan lender doesn’t require a credit check. And many “no fax” payday loan lenders require no more than a government-issued ID, an active bank account, and proof of income—typically in the form of paycheck stubs from an employer.  

For Uber drivers and other self-employed individuals seeking personal loans, proving income can be challenging since they don’t work for a company and don’t have any paycheck stubs. Instead, self-employed people need to make sure that they have a couple of items on hand to show proof of income: 

Tax Returns and Transcripts

Tax returns are the most requested alternative documents requested by a lender. With good reason, if anyone can prove that you have been receiving income, it’s the Internal Revenue Service! Tax returns can provide—even at a glance—details on your payment throughout any given year. Even if you have bad credit, tax returns can provide information that can distinguish between an approval or a denial. A potential borrower should expect to provide 2-3 years of tax information for most payday loans, including signed tax returns.

Bank Statements 

Uber drivers will need to have bank statements available that show several weeks (or months) of deposit activity. Remember, lenders want to make sure that their money is returned, so a borrower will need to prove that they have a steady revenue stream.

For all of their ease and accessibility, nearly all payday loans come with the same two conditions: a high interest rate and short loan terms. Usually, a payday loan costs about $15-$30 for every $100 borrowed. On average, people borrow about $350-$400 and agree to pay it back within 14-30 days. Repayment can come in one lump sum at the end of the loan term or spread out over weekly payments or installments.  

If the loan or cash advance cannot be repaid within the terms of the loan, payday loan lenders will roll the balance of a loan over into a new loan, which will allow the borrower more time to repay the cash advance loan amount. However, as a new loan, the balance is now subject to another round of interest and fees, which will automatically give you a new, higher credit to pay off. And if that “new” cash advance loan isn’t paid off on time, it rolls into another renewal. 

Have you ever heard about a payday loan charging a three hundred percent interest rate or more? That’s how it happens; the 15 to 30 percent base interest rate is compounded as the loan remains unpaid. And since borrowers are already in debt when they get payday loans, resolving them can be difficult. 

If you’re an Uber driver considering a payday loan, it is essential that you thoroughly understand your repayment obligations before you accept any money. You don’t want to solve a cash problem today by creating an even more significant problem for tomorrow.  

Title Loans for Uber Drivers 

If you’re an Uber driver that owns your car, then a title loan may be another option for you. A title loan is a secured loan that uses a vehicle’s title as collateral. In exchange for a loan, the borrower surrenders the car’s title—the document that establishes the car’s legal owner—to the lender. While you can still drive the car when you take out a title loan, the title itself has a lien on it, which means that the title loan lender essentially suspends your legal ownership. 

A title loan amount can be secured for up to 25% of the value of the car. When the loan is repaid, the title is reissued to the borrower. 

If you default on a title loan and don’t repay it, the title loan lender keeps the title and repossesses your car so that they can sell the vehicle and recoup their funds. Like a payday loan, a title loan can be rolled over into a new cash advance loan over and over again until the debt is paid off.  

Many title loan lenders don’t perform credit checks on potential borrowers, making title loans great options for Uber drivers who also have bad or not-so-great credit. In addition, since the car’s title secures the loan, the chances of approval are more significant than for an unsecured loan that heavily weighs a potential borrower’s credit score.

Small Business Loan

As independent contractors, Uber drivers can qualify for small business loans. These personal loans are available through banks and online lenders and can go through a quick application and approval process. However, these loans will be subject to high interest rates and fees.

There are more affordable loan options available through the federal government’s Small Business Association (SBA). However, it’s important to note that applicants for these loans go through a more rigorous application process and require a relatively clean credit history.

While these options for personal loans for uber drivers are available, it is always ideal to avoid a loan when you can. Uber drivers are independent contractors that need to spend every dollar wisely. Here are a couple of tactics that can help build some financial habits that may reduce your need for a personal loan in the future.

Set a Budget

Being an Uber driver has many regular costs, like gas and insurance, that need to be covered to do business. The best way to manage those expenses—and every other financial responsibility—is with a budget. 

A budget is a list of the things you need to spend money on over some time in its simplest form. For example, a typical personal budget includes expenses every month. 

It is understandable why some Uber drivers and other gig workers don’t believe they can live on a budget. Income can vary on so many things that it is difficult to expect the same payment every month. And with taking care of their can and the necessities of their lives, it can seem challenging to plan. However, many people find that using a budget helps them see precisely when bills are due, which can help plan how often and for how long an Uber driver should plan to be on the road earning money. In addition, the information that comes from a budget can help organize spending and set a schedule that can bring about some balance to work and life. 

Create an Emergency Fund 

One of the best ways to use quick loan options—or any personal loan at all— is to use them sparingly. Keeping yourself in a cycle of drawing loans and paying them off will not allow you to focus on the things that business owners and contractors need to invest money in, like increasing efficiency and maximizing profits.  

To that end, building an emergency fund can help. An emergency fund is an account that holds the money you will need for surprise expenses like unexpected car repairs. As an Uber driver, you must maintain your car to make a living. The next time your car needs some care, it would be far less expensive to draw those funds from your accounts. Including your emergency fund as part of your monthly budget will help keep it funded. It may take some time for you to get your emergency fund up to a meaningful amount. And that’s okay; contribute what you can, but make sure that you do it regularly.

Keep your emergency loan in a bank account separate from any of your other accounts, so it won’t be easy to spend. Set your first savings goal at $1,000—a solid number that can get many minor but necessary repairs done. Once you hit that first goal, you’ll want that number to keep growing!

The Bottom Line: Loans for Uber Drivers

When you are working for yourself, it can seem like you have to rely on yourself for everything. But there are loans for Uber drivers, freelancers, and other gig workers stuck in a financial hole. As the economy roars back to life, many experts predict that the way we live, work, and play will continue to change for years to come. And as our society continues to dill with freelancers, entrepreneurs, and other people who want to be in business for themselves, the options for cash advance loan assistance will continue to grow.  

However, whatever options exist, independent contractors and freelancers must know precisely what they’re getting into with any loan option that they explore. Knowing the ins and outs of any loan agreement and its terms provides the specifics on what to expect and what to pay for. When you’re in business for yourself, every dollar you spend matters genuinely.  

FAQ: Cash Advance Loans for Uber and Lyft Drivers

What are cash advances, and how do they differ from regular loans for Uber drivers?

A cash advances is a type of short-term loan, often issued by credit card companies or specialized lenders. They typically come with higher interest rates than regular loans and are meant for immediate cash needs.

Can Uber drivers apply for an unsecured personal loan, and how is it different from secured loans?

Yes, Uber drivers can apply for an unsecured personal loan. Unlike secured loans, which require collateral (like a car or house), unsecured funding is based on the borrower’s creditworthiness without requiring any collateral.

What options are available for Uber drivers with a poor credit history?

Uber drivers with a less-than-perfect credit score can look into bad credit loans. These are specialized loans offered to individuals with low credit scores but might come with higher interest rates.

How does unsecured funding work for gig workers like Uber drivers?

Unsecured loans for gig workers function similarly to regular unsecured loans. They are based on creditworthiness, with the primary difference being the evaluation of the borrower’s income source since gig workers might have variable incomes.

Are credit unions a good option for Uber drivers seeking loans?

Credit unions can be an excellent choice for Uber drivers as they often offer competitive interest rates and more flexible terms than traditional banks. Additionally, they might be more understanding of the gig economy and its income variations.

How do unsecured personal loans differ from a payday loan or cash advance?

While all three can provide immediate funds, unsecured personal loans typically have lower interest rates than payday loans or cash advances. Additionally, they often come with longer repayment terms, making them more manageable for borrowers.

Are there specific car loans available for Uber drivers to upgrade or repair their vehicles?

Some lenders offer specialized car loans for rideshare drivers, taking into account the potential earnings from the platform. These loans can be used for purchasing a new vehicle or repairing an existing one to meet Uber’s standards. Depending on the fixes required, it may be in a driver’s best interest to fix their vehicle instead of selling it, as it can be difficult to get rid of a car with negative equity.

Is it possible to get a car loan without using the vehicle as collateral?

Traditional car loans typically use the vehicle as collateral. However, if an Uber driver is looking to borrow without tying the loan to their car, they might consider an unsecured loan, though it may come with higher interest rates.

What are the typical interest rates on bad credit loans for Uber drivers?

Interest rates for bad credit loans can vary widely based on the lender and other factors, but they are generally higher than standard personal loans. Rates can range from 10% to as high as 30% or more.

Can an Uber driver apply for multiple loan types, like a car loan and an unsecured loan, at the same time?

Yes, an Uber driver can apply for multiple loans. However, each application might result in a hard inquiry on their credit report, which can temporarily reduce their credit score. It’s essential to weigh the need against the potential impact on one’s credit health.

CreditNinja’s Thoughts on Cash Advances for Uber and Lyft Drivers 

The gig economy can be rough. While a quick payday loan may seem like a great solution when you need to cover unexpected expenses, they almost always come with heavy fees, high rates, and short repayment terms that can make your financial situation even worse. Instead of falling into a cycle of debt with predatory bad credit loans, consider personal loans from CreditNinja. With a personal loan from CreditNInja, you can ditch the hassles that can come with a traditional cash advance and enjoy perks like: 

  • Flexible repayment schedules 
  • Fast funding*  
  • Easy application 
  • Industry-wide competitive interest rates 
  • Top notch customer service 

References:

  1. The Gig Economy Grows Up | PYMNTS
  2. Uber is now offering $1,000 cash advances | Daily Dot
  3. How Do Small Business Loans Work | Experian
  4. Title Loan Definition | Investopedia

*Not all loan requests are approved. Approval and loan terms vary based on credit determination and state law. Applications approved before 10:30 a.m. CT Monday – Friday are generally funded the same business day. Applications approved after this time are generally funded the next business day. Some applications may require additional verification, in which case, the loan if approved, will be funded the business day after such additional verification is completed.

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