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Emergency Loans – How to Borrow Money Fast
Having emergency savings in place can make unexpected expenses easier to deal with. But if you haven’t gotten around to creating a rainy day fund yet or yours has been depleted, a loan is one financial solution to consider. Emergency loans can come from different sources, including personal loan lenders and short-term lenders. Before you seek out quick funding solutions, however, it’s helpful to know what to expect.
What Are Emergency Loans?
An emergency loan is any loan that’s designed to help you borrow money fast to fill a pressing financial need. For example, that can include:
- Personal loans
- Installment loans
- Payday loans and no credit check loans
- Pawn shop loans
- Credit card cash advances
These kinds of loans are designed for unexpected situations in which you don’t have the cash on hand to cover an expense. So for example, you might need an emergency loan if your car breaks down or your dog is injured and requires surgery.
Types of Emergency Loans
Personal loans can offer flexibility since you can use them to pay for virtually any type of emergency. Short-term personal loans may offer repayment terms of 12 months or less while a long-term personal loan may give you three to five years to repay what you owe. Personal loans can come with fixed or variable interest rates and the amounts you can borrow will vary by lender.
Installment loans and other short-term loans work like personal loans. But they can differ when it comes to the credit score requirements needed to get approved and the interest rates and fees you’ll pay. For example, a payday loan or no credit check loan may be very easy to get but you could be looking at an annual percentage rate in the triple-digit range. Pawnshop loans can also have finance charges and while the APR may be lower compared to an installment loan, you have to pledge your personal assets as security.
A credit card cash advance isn’t a loan per se but it can also be used as a source of emergency cash. What’s important to note with credit card cash advances is that the APR you’ll pay is often higher than your standard purchase APR. Additionally, interest begins accruing on cash advances right away and your credit card company may charge you a fee for the convenience of withdrawing cash from your credit limit.
Emergency Loans for Bad Credit
When applying for loans or lines of credit, lenders will use your credit score and credit history to decide whether to approve you. If you have bad credit, getting an emergency loan isn’t out of the question. But it may limit your options.
For example, it’s possible to get personal loans with bad credit. There are lenders that offer bad credit personal loans for emergency situations or any other time when you need to borrow money. The trade-off is that while you can still get approved for a personal loan with bad credit, you may be capped at a loan amount. And more importantly, your loan may come with a higher interest rate.
Installment loans offer an advantage since bad credit typically won’t stand in the way of getting approved. But again, you’re more likely to pay a higher interest rate and fees for this type of loan. And in the case of payday loans, they can easily lead to a cycle of high interest debt that can be difficult to dig out of.
Tapping your credit card limit for cash in an emergency allows you to sidestep having to apply for a loan or line of credit. But you may not be able to borrow as much if your credit limit is already low due to your poor credit score.
How to Get a Personal Loan in an Emergency
If you need money quickly, a personal loan could be the best option in terms of cost, convenience and how much you’re able to borrow. It’s important to shop around and compare personal loan terms and options, especially if you have bad credit. Specifically, consider:
- Minimum credit score requirements to qualify for a personal loan
- Minimum and maximum borrowing limits
- Personal loan fees, including origination fees and prepayment penalties
- APR and whether the rate is fixed or variable
- Loan repayment terms
Getting multiple quotes from different lenders can help you narrow down loan options. Just be sure that if you’re getting quotes it only requires a soft credit pull versus a hard credit check so there’s no impact to your credit score.
And if you run into trouble getting a personal loan in an emergency, think carefully about which alternatives you want to pursue. Installment loans or cash advances can help you get funds fast but they can come with a high cost. Borrowing from friends and family or even asking your employer for a paycheck advance could be better options for closing temporary financial gaps.
How to Use Personal Loans
Rebecca Lake is a freelance writer specializing in personal finance, credit and debt. She’s a contributor to U.S. News and World Report, Forbes Advisor and The Balance and her work has appeared online at CreditCards.com, MyBankTracker, Money-Rates.com and dozens of other top publications.