If you are going through an unexpected financial crunch, emergency loans can help you with quick funds. When you have a low credit score or are already failing to make monthly payments, getting approved for a new loan is extremely difficult.
Fortunately, there are a handful of other options, commonly known as emergency loans that are open for all. These loans might attract higher interest rates and different terms than any other mainstream loans. Hence, it can get a little confusing if it is your first time applying.
Read on to learn about different types of emergency loans and other available alternatives.
What Are Emergency Loans?
Most emergency loans are short-term and meant for borrowers with a low credit score. As the name suggests, it is a type of loan that helps in case of unexpected expenses like a medical illness, a car repair, and other unanticipated expenses.
You can find different types of emergency loans online. Most lenders accept applications online and the complete process, from applying to approval, is quicker than other types of loans. The notable drawback is that all of these loans attract higher interest rates. Additionally, borrowers must repay the total outstanding and the interest within a very short period (30 to 60 days).
Those are my top 3 Best emergency Loans
- Admin. fee: 0.99% - 5.99%
- Annual income of $80,000
- Min credit score of 640
- Failed payment fee: $15
- Day of Grace: 3 days
- Grace period fee: $25
- Administrative fee: 0% - 8%
- Min credit score of 620
- Quick funding - 1 Day
- Grace period fee: 5% Max $15
- No prepayment penalty
- No fees
- Low interest rate
- Fixed Rates
- Min credit score of 680
- Unemployment protection
- SoFi member benefits
Emergency Loans – The Available Choices
Emergency loans for bad credit are open for all. There are five options to choose from and approval is quicker as well as easier than most of the standard loans.
Short-term personal loans are your best bet if you’re looking to get an emergency personal loan for bad credit or aren’t eligible for a standard installment loan. These are unsecured loans that you can apply for when you require a small amount of money.
It is easy to get approved if you have the required proofs of income, repayment history, and other related documents. You get a fixed interest rate and set repayment term, quite similar to other traditional loans. The interest rate terms may fluctuate depending on your credit score and ability to pay the lender.
Credit Card Cash Advance
This is another type of emergency loan which is mostly pre-approved. A few credit card companies offer this when you book a card. A certain amount is pre-approved, and you can directly withdraw the required cash from an ATM or request a check/online transfer from the card issuer.
However, be informed that the lender will charge you a higher interest rate than normal purchases. You will also be charged a service or processing fee. Be wary of how much advance you take as the interest starts accruing immediately. Still, this is one of the easiest and quickest ways to draw cash provided your credit card has the limit.
You can request for payday loans for $500 or lower, as per the Consumer Financial Protection Bureau. The lender will issue the requested money through a check or prepaid debit card, and you will need to pay off the loan and the related fees with the next paycheck.
A Payday loan is an option if you’re looking for emergency loans without a credit check. The only documents required to get approved are your income proof and a checking account. Nevertheless, this option should be avoided whenever possible given the annual percentage rate (APR) is incredibly high for these loans. Accordingly, make sure you make a good distinction between available lenders when attempting to find the best payday alternative loans.
Pawn Shop Loans
To get a pawn loan, all you need to do is take an item of value to the pawnshop. The owner will evaluate the authenticity of the product, how much its worth, then offer you an amount. If you agree, the item will be used as collateral. Most pawn shops give you 30 days to repay the loan and collect the pawned item.
If you miss the date, the lender will sell off the item to recoup their money. As this loan doesn’t involve a credit check or any application or approval process, it is comparatively easier to get if you have an item of great value.
If you’re in urgent need of funds but aren’t eligible for a traditional loan, you can use your car’s title to access a short-term loan. Since there is no credit score requirement, it is rather straightforward to get one. If your car is in good condition, lenders will agree to loan you amounts that can go as high as $10,000. The problem is that title loans have extremely short repayment terms.
Note that if you default on a title loan, the lender has the right to take possession of your vehicle. Also, title loans do come with high APRs, so you may want to reconsider this emergency loan option.
Are There Emergency Loan Alternatives?
While emergency loans are easy to get, they also attract higher interest and annual percentage rate, and shorter repayment terms. Furthermore, if you default, the possibility of losing out on the collateral adds up to the pressure. Still, there are other options available. Here are some alternatives that you can consider before taking out an emergency loan.
Credit Cards With Low Interest
A low-interest credit card is one of the safest alternatives. However, to get approved for a card with an APR of 0% for a certain duration or purchases, you need to have a good credit score. These promotional offers can be converted into a short-term loan at possibly zero interest.
Still, keep in mind that applying for a new card will be marked as a hard inquiry on your credit score. Moreover, if you are unable to repay within the promotional period, you will end up paying steep fees and interest.
Repayment Plans From Medical Bills
You should negotiate with the hospital in question about a potential repayment plan if you have recently incurred an unexpected medical expense. In most cases across the US, medical providers agree to set patients up with a short-term payment plan. There are other medical programs and financial support options available for low-income households. We recommend getting in touch with the hospital to understand if you qualify.
Restructure Your Student Loan
You may request an income-driven repayment plan (IDR) based on your discretionary income. Alternatively, you can also apply for student loan forbearance or deference. This way, you’ll be able to free up some money temporarily and use it for immediate requirements. Most lenders cap the monthly installment at a specific rate depending on your discretionary income. If eligible, you won’t even need to pay anything for a certain duration.
Home Equity Line of Credit
HELOC, abbreviated for Home Equity Line of Credit is an option wherein you put up your house as collateral for the loan. It is quite similar to the title loan, but the loan amount can go higher than $10,000. A home equity loan is a favored option for borrowers, given that they can compare the available options and repayment terms.
Although emergency loans for poor credit attract high-interest rates, they are easy to get. If you’re sure that you can arrange the amount within the agreed repayment period and are okay with the considerably higher charges, this might be the right fit. However, we always suggest that you check all the other alternatives mentioned before selecting an emergency loan.