An unplanned car repair, medical situation, or death in the family are all difficult situations, but if you don’t have an emergency fund with adequate money to cover the bills you can experience additional stress. Many times, an expense can’t wait until you’re able to save up enough cash, and you may need to consider getting an emergency loan. Here’s what you need to know.
What is an emergency loan, and how do you get one?
An emergency loan is a personal loan that helps you cover the cost of an emergency. The amount you apply for will be based on the cost of your expense, but many emergencies are $2,000 or less. Payday and title loans and credit card advances can also be considered emergency loans, often providing funding on the spot. However, these types of loans usually have high interest rates and should be avoided unless you have no other option.
If you’re looking for an emergency loan, search for the best personal loans available — based on interest rates and terms. Personal loan terms and rates can vary by lender. Start your search on Credible where you can explore your options and easily compare rates and lenders.
Wondering how to get an emergency loan? You can find one from at least three places. Each type of lender will have different terms and requirements for qualification. Here’s a brief overview:
- Credit Unions
- Online lenders
1. Banks: Banks may require borrowers to have higher incomes and credit scores than credit unions or online lenders.
2. Credit unions: Credit unions often take a community-based approach and will work with individual borrowers to get them approved. However, you usually need to be a member.
3. Online lenders: Online Lenders often provide pre-qualification information on their website, which will help you understand your chances of approval before you apply.
Whatever lender you choose, make sure they’re reputable. Visit a site like Credible where you’ll receive personalized loan offers from multiple, vetted lenders.
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Pros and cons of emergency loans
Emergency loans often borrowers several advantages.
- Flexibility: They can be used for virtually any expense, which provides flexibility. Depending on your credit history, emergency personal loans can be unsecured, which offers less risk.
- Quick and painless process: Many lenders offer a fast application process, with approval and funding in less than a couple of days, which can be important during an emergency.
- Repayment options: Lenders offer a variety of repayment terms from 12 to 48 months, which can help you fit the payment into your budget while you save money and build an emergency fund for future expenses.
You can use Credible’s personal loan calculator to determine your potential loan payments, then get prequalified to find the best personal loan rates.
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However, emergency loans also have some drawbacks.
- You could get declined: Since these loans are often unsecured, lenders will scrutinize your credit history, income, and current debt load. If your credit score is low, you may be declined or unable to secure the best rates.
- You may not be able to borrow enough money: A lower credit score might limit the amount you’ll be offered, and you may not be able to borrow enough to cover expensive emergencies, like a new roof or car transmission.
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While personal emergency loans can provide funding during a crisis, they’re not your only option. Here are some other funding options you have, aside from personal loans:
- Balance transfer credit cards
- Home equity line of credit or home equity loan
1. Balance transfer credit cards
Another way to get money is to use a balance transfer card that offers debt consolidation with a 0% APR interest credit card. Balance transfer cards can be an effective way to secure money for the short term as long as you can make the monthly payment. You’ll need to pay off the balance before the end of the promotional period, which is often 12 to 18 months, otherwise, interest will accrue from the start date of the charges.
You can also use Credible to shop for credit cards, including balance transfers. Compare some of the top balance transfer cards side-by-side to see their different terms and perks.
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2. Home equity line of credit or home equity loan
If you have equity in your home, you can consider getting a home equity line of credit or a home equity loan. This type of loan is secured offers lower interest rates. You may be able to qualify for a higher loan amount depending on your available equity, but you will put your home at risk if you can’t make the payments.
If your expense is a medical bill, some providers will set up an interest-free monthly repayment plan. Or you might consider asking a family member or friend for a short-term loan. Be careful, though. If you cannot pay them back for any reason, you will jeopardize the relationship.
Emergencies are stressful enough. By comparing all of your options on a site like Credible, you can find the best personal loan rate for you and your situation, helping you to address the emergency and protect your future finances.
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