Emergency Loans: Quick Guide to Getting One
10 MIN READ
Published July 06, 2023 | Updated July 25, 2023
Emergency loans can provide you access to cash fast to cover emergencies such as medical expenses and car repairs. But before you apply for one, it is important to compare the different types of loans and explore alternatives.
Emergency loans can help you cover unexpected gaps in your income, home improvements, or last-minute expenses that you weren’t anticipating. Options like personal loans, payday loans, and credit cards can all be used for the same purpose. However, because interest rates and qualifying requirements vary so greatly between different loan types, it is critical to do your homework.
Ultimately, the best emergency loans should offer you convenient applications, fast approvals, and quick funding so you can get cash when you need it the most. Read on to learn more about your options, how these loans work, alternatives to emergency loans, and the best lenders.
Best Types of Emergency Loans
Personal loans are the most common type of emergency loan you’ll find to cover unexpected expenses. But they’re not the only ones. Read on to learn more about the top four options.
1. Personal Loans for Emergencies
Unsecured loans like personal loans are considered the best emergency loans out there because they’re usually quick and have affordable interest rates. Lenders typically check your credit score, your income, and history to determine if you are eligible.
Interest rates can range from 6% to 36%, depending on the lender and your credit score. The application process is quite easy, and most lenders offer online applications. Before you apply, determine how much you can afford. Pre-qualify for the loan and compare different offers. This will allow you to preview the repayment term, amount, and APR. You’ll need documents such as your pay stubs, address proof, and government ID. Once approved, you can get funds in your bank account quickly, usually the next business day.
2. Emergency Installment Loans
There are several online lenders that offer emergency installment loans online with a fast application process and quick funding. Most websites will allow you to check the interest rate you are eligible for before applying. Before applying, make sure you find a reputable lender that offers you an emergency online loan at a maximum APR of 36%. Beyond this, the loan will not be affordable. Review your income and your credit score to ensure you will be eligible and will be able to repay the loan.
The biggest benefit of online emergency loans is the ease of application and how quickly you can get cash. The drawback here is that some lenders may charge predatory interest rates and fees that may make borrowing very expensive.
3. Emergency Payday Loans
Payday loans are high-interest, low-amount loans. Typically, payday lenders do not require credit checks, so they are an attractive option for those with poor credit. They also offer faster turnarounds. Usually, loan amounts are less than $500, and the annual percentage rate can be 400% or more.
Online payday loans for bad credit are easier to qualify for and faster than most other types of loans, but they are incredibly expensive and have a shorter repayment term of two weeks. If you are unable to repay the loan by your next payday, you can roll over the loan for another two weeks. But be aware that doing this comes with high late fees and can potentially trap you into a debt cycle out of which it may be challenging to climb out.
4. Emergency Cash Loans
An emergency cash loan is a term usually used for payday loans, pawn shop loans, and cash advance loans that offer quick access to cash. Pawn shop loans allow you to get a loan at a pawn shop in exchange for leaving a valuable item as collateral. You’ll then need to repay the loan in 30 days to get your collateral back. Typically, you’ll pay $10 in fees for every $100 you borrow for 30 days, making the APR 122%.
A cash advance is a loan offered by your credit card company. With this option, you’ll be borrowing against your line of credit. You can get cash advances by visiting your bank in person with your credit card or by withdrawing it from an ATM. Cash advances usually come with a fee of 3%-5% of the amount you borrow. Additionally, the interest rate you’ll pay on the cash advance can be anywhere from 18.99% to 29.99%.
Requirements for Obtaining Emergency Loans
The credit score requirements for emergency cash loans vary by loan type and lender. You’ll typically need a fair credit score of 580 to 669 to qualify for a loan. Borrowers with higher scores get better interest rates. Credit scores of 670-739 are considered to be good scores, while 740 and higher are considered to be excellent credit scores.
Other than your credit score, emergency loan lenders will look at many other factors to determine if you are eligible, such as:
- Your income should be sufficient to ensure you’ll be able to pay off your loan.
- Your debt-to-income ratio. This will show how much money you earn each month versus how much you owe.
- Your proof of address. A favorable living situation is favorable to a lender.
- Your proof of identity. This allows lenders to verify your information.
Bad Credit Emergency Loans
Even if you have a poor credit score of less than 630, you may still have access to loan products. Some lenders specialize in bad credit loans, but these loans will typically come with a higher interest rate. Here are a few ways to improve your chances of getting an emergency loan approval with bad credit:
- Offer collateral. Secured personal loans are not common, but some lenders offer this option. Adding collateral improves your chances of qualifying.
- Add a co-borrower or a co-signer to your loan application. Keep in mind that if you fail to make the payments, your co-applicant may be liable.
- Increase your income. Pick up a side gig or overtime hours to increase your income. This will improve your chances of qualifying for the loan.
Comparing the Best Emergency Loans
With hundreds of lenders offering emergency loans, it can be overwhelming for you to pick one that suits your needs. To make things easier, here is a list of the top three lenders, along with the interest rates, loan amounts, and terms they offer:
Loan amount: $2,000-$35,000
Term: 12 months-60 months
Loan amount: $1,500-$20,000
Term: 24 months-60 months
Loan amount: $5,000-$100,000
Term: 24 months-144 months
Reviews of Emergency Loan Providers
Choosing an emergency loan provider that is right for your needs can be challenging in a competitive market. To find a lender you can trust, it is best to check the company's reviews thoroughly. Read full reviews and ratings, and check the description of the lender to see if the services they offer are right for your needs.
You can find reviews of a loan provider on Google, Yelp, and TrustPilot, among other places. Additionally, you should also check to ensure that the lender is accredited by the Better Business Bureau and has good reviews there.
Comparing Interest Rates and Repayment Terms
Emergency loans are available through online platforms, credit unions, and traditional banks. The interest rate and repayment terms vary for each lender, so it is important to compare all your options to find the best emergency loans. Here are a few tips to consider when comparing loans:
- Prequalify whenever possible. This will allow you to shop around and see if you are eligible for the loan.
- Some lenders may restrict the use of a loan for business, education-related expenses, and other activities. Consider the purpose of the loan and check if it is permissible under the borrower agreement.
- Compare the fees charged by different lenders. Different types of loans come with fees such as prepayment penalties, late payment fees, and origination fees. Some lenders may offer loans without any of these fees.
- Compare repayment terms to see if the lender offers you a loan term that you are comfortable with. A longer-term will allow you to pay a lower monthly installment but will increase your total loan cost.
Three Alternatives to Emergency Loans
Emergency cash loans aren’t the only option when you want to borrow money fast. Depending on the purpose of your loan, consider the alternatives listed below before you apply.
1. Payday Loans as an Alternative
Payday loans are short-term loans that can provide you with immediate cash. These are small-dollar, high-cost loans that need to be repaid when you get your next paycheck, typically in two weeks. Payday loans are notorious for charging very high APRs, and it can be difficult to get out of them if you do not have a plan to pay them off before your due date.
While payday loans do provide access to quick cash, they can be risky even if you have an emergency. Lenders don’t check your credit history or determine your ability to make loan payments before lending you the money. If you aren’t prepared to repay what you borrowed, you may borrow again, causing you to slip into a debt cycle.
2. Credit Cards as an Alternative
In a pinch, you can use your credit card to cover emergency expenses. But be vary that if you are unable to clear your balance quickly, your credit card debt will continue to grow as it accumulates interest charges. If you continue to make minimum monthly payments each month and not much more, your debt can easily snowball.
Another option is to take out a cash advance. This is one of the fastest ways to access cash, but the fees and interest rates can be quite high. Credit card cash advances are a good option for those who want cash immediately and can’t wait for a day or two that it takes to receive funds through a personal loan.
3. Assistance Programs for Emergency Financial Situations
There are several other alternatives available if you are facing a financial emergency, but they may not be convenient or fast. But, depending on your situation, these may be better than expensive options, such as a payday loan.
Here are a few options to consider:
- Ask friends or family for a loan for an emergency. Be sure to repay them on time to avoid any relationship problems.
- If you need cash to make a purchase, consider using a “buy now, pay later” app. This will allow you to pay for the purchase in affordable installments.
- If you have medical debt, check if you are eligible for a hardship plan or a payment plan.
- Approach charities and nonprofits to see if they offer any assistance for those facing financial hardship.
Final Thoughts on Emergency Loans
Emergency loans can be a convenient and quick way to get access to cash fast to cover unexpected expenses when you don’t have an emergency fund to rely on. While personal loans tend to be the most common option, there are many other alternatives to explore, such as cash advances, payday loans, and assistance programs. Ultimately, the best loan option for you will be one that offers you the best terms, the lowest APR that you may be eligible for, and quick funding.
When not paid back on time, emergency loans can add to your existing debt. If you have over 10k in unsecured debt, TurboDebt can help. Take benefit of our free consultation to see how we can help you find the right debt relief option for your individual needs.