What Are Emergency Loans and How Do They Work?

If you urgently need cash to resolve a pressing issue, you can consider getting an emergency loan. Emergency loans are loans that you can quickly get to pay for unexpected expenses or other urgent matters Ipass — Emergency Loans online.

While several emergency loan types are available, the most common ones are short-term with high interest rates and fees. Most emergency lenders deliver loan proceeds to the borrower’s account within a few business days of approving a loan application. Top lenders like Upstart and Avant can provide you with emergency funds within 24 hours of accepting your application.

How Do I Choose an Emergency Loan Lender?

Before you borrow money from an emergency lender, you should shop around and compare offers. That way, you can find the emergency loan provider with the best terms. If you borrow money from the wrong lender, you could end up with unfavorable terms that put you in a tighter financial spot.

While shopping around, look out for these features to find a lender that provides the best emergency loans:

Eligibility Requirements

Lenders typically only give emergency loans to U.S. residents who are above 18 with steady incomes. Most lenders also consider an applicant’s credit history to determine their eligibility for emergency loans. For instance, many lenders only give loans to people with a minimum credit score of 600 – fair to good credit.

What if you have a poor credit history? You can still get loans with bad credit. However, note that bad-credit loans usually come with higher interest rates.

Loan Amounts

Lenders have minimum and maximum loan amounts that they are willing to give. For example, ClearViewLoans offers $200 to $5,000 while Avant offers $2,000 to $35,000. If you need less than $500, there’s no point contacting lenders that won’t go lower than $1,000. Also, if you have a bad credit history, you may not qualify to access a lender’s maximum loan amount.

Cost

Lenders typically charge fees for providing services. These fees may include an application or origination fee. An emergency lender will also charge late payment penalties if you do not make your monthly payments on time.

The best emergency loans are affordable. Find such loans by shopping around for lenders with competitive fees and the most attractive interest rates. You should also read customer reviews to check if a lender charges hidden fees.

Payment Terms

Payment terms are a lender’s conditions regarding the repayment of a loan. The terms will typically include the time you have to repay the loan and the interest rate the loan will attract.

The best emergency loans come with a convenient time frame for making monthly payments. If you borrow a few hundred dollars, you may have to repay the entire sum plus the interest within a few months. Depending on the lender, a larger loan may come with a one- or three-year term.

Some reputable lenders will even let you choose your monthly payment amount and term. However, note that more extended payment periods usually attract higher interest rates.

Speed of Funds

If you need an emergency loan, the sooner you can receive the loan proceeds, the better. As such, you should only work with an emergency lender that can deposit the loan proceeds in your bank account within one business day. If you want a faster loan, go for a lender that offers same-day emergency loans.

Online Services

Choose a lender that provides services via a user-friendly online platform. The best lenders offer 24/7 services via websites and mobile apps. The online platform should also be secure enough to prevent your private information from falling into the wrong hands.

How Do I Get an Emergency Loan with Bad Credit?

People only seek bad credit loans when they have a low credit score (300 to 600). A bad credit score indicates that a borrower is high-risk. Most lenders don’t want to work with such individuals because they are less likely to repay loans on time.

If you have a low score, you can get bad credit loans quickly by contacting emergency lenders that offer such products. Lenders that provide emergency loans for bad credit may offer a secured or unsecured loan. An unsecured loan is easier to get because it doesn’t require collateral, but secured loans attract lower interest rates.

An emergency lender may also offer these loan options:

Credit Union Payday Loan: Federal credit unions are non-profit organizations that financially assist their members. Most people opt for a credit union payday loan because such loans have less stringent conditions than a traditional payday loan. A credit union loan typically won’t exceed $2,000, and the loan term can be 1 to 12 months with a maximum interest rate of 28%. However, note that you can only qualify for a credit union loan if you are a credit union member.

Apply with a Co-Signer or Co-Borrower: If you have a bad credit score, an emergency lender may give you a loan if you have a co-signer. The co-signer will agree to pay your debt if you default. However, a person can only be a co-signer or co-borrower if they have good credit or earn more income than the borrower.

If you have trouble accessing any of the above loans, below are emergency loan alternatives that you can pursue:

Zero-Interest Credit Cards: If you have a small but urgent expense,  you can apply for a 0% APR credit card and use it to pay. However, you can only get such a card if you have an excellent credit score. The card will give you access to interest-free financing for up to 21 months. After the introductory period ends, interest will begin to accrue. You can avoid paying that interest by settling your credit balance before the introductory period ends.

Family Loans: If you are on good terms with your family, consider borrowing money from one of them. Unlike other lenders, you don’t need a minimum credit score or paperwork to borrow money from family. However, if you fail to repay your debt, your family member could sue you.

Medical Repayment Plans: Before taking a loan to settle your outstanding medical expenses, contact the hospital to discuss setting up a repayment plan. Hospitals that offer such options can provide you with an interest-free monthly payment plan. Alternatively, you can negotiate with the hospitals to accept a lower sum if you agree to pay it right away.

Nonprofit Organizations: You can find various charities that help vulnerable people settle their bills. For example, some nonprofits provide financial assistance to people facing eviction or who are about to lose their homes because of late payments.

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