How to get an emergency loan
Although the process for applying for an emergency loan can vary from one lender to the next, the general process for finding the right loan for you will be the same.
Check to see if you are prequalified
You can see what rates, terms and amounts you might be eligible for by prequalifying for a loan without having to impact your credit score. Although many lenders offer this option, some lenders may require that you submit to a hard credit inquiry. This can lead to your credit score being affected by several points.
Prequalification allows consumers compare different personal loan lenders easily to find the best rates and terms that match their financial goals.
Send an application
After you have chosen a lender, you will submit a formal request. You will need to prove your income, identity, residency, and any other financial or personal details as part of your application. You may need to show the lender pay stubs and W-2s as well as your mortgage/rental agreement.
The lender will conduct a hard credit investigation, which could temporarily lower your credit score.
Where can I find emergency loans?
Online lenders, credit unions and banks can all provide emergency loans. Online lenders are more flexible than traditional banks and credit unions and offer quicker funding and application times.
Payday lenders can also provide emergency loans. These lenders can provide quick access to cash and don’t require credit checks. However, their lending practices can be predatory and loans may have APRs up to 400%. Many borrowers find it difficult to repay payday loans, and end up in debt cycle. Payday lenders should be avoided as a rule.
Bad credit borrowers can get emergency loans
A low credit score may make it difficult to get an emergency loan. But there are options. Those with poor credit scores have many options for accessing funds to pay an emergency expense.
- Use a co-applicant. A cosigner, or co-borrower, can increase your chances of getting a loan. It can also lower your risk as a borrower to lenders. This is because the loan is being repaid by two people instead of one. Remember that your co-applicant is responsible for paying the emergency loan if you can’t repay it.
- Provide collateral. A collateral loan (also known as a secured loan) can improve your chances of getting an emergency loan approved. You’ll need to place a valuable item on the line. Your lender may legally take your collateral if you are unable to repay the loan. It all depends on the lender. Common forms of collateral include vehicles and savings accounts.
- Apply to a payday loan alternative. Traditional payday loans can be difficult. Credit unions offer payday alternatives loans (PALs), which are a more secure option. The maximum APR for PALs is 28% and they are unsecured. However, PALs are often smaller loans and may not be sufficient to cover all your emergency expenses.
Alternatives to Emergency Loans
It’s worth considering all options before you take on any debt. These are some alternatives that you should consider before applying to an emergency loan.
Borrow money from family and friends
It might be worthwhile asking loved ones to help you if you are in dire need of money. You can protect your relationship by making sure everyone is clear about the expectations regarding borrowing and repaying the money.
Get a credit card that offers 0% intro APR
New account holders may be eligible for zero-interest introductory terms on certain credit cards. You can avoid interest if you repay all purchases within the promotional period. These credit cards are reserved for borrowers who have strong credit.
Home equity loan or line of credit (HELOC), available.
Are you a homeowner? With a loan or credit line, you might be eligible to borrow against your equity. Although these loans have low interest rates, you will be using your home as collateral.
Ask your employer to give you a pay advance
You might be able get paid sooner than you expected by some employers to help you get through difficult times. You may be eligible for paycheck advance apps.
Ask about the hardship programs
Your lenders may grant temporary forgiveness if you are having trouble paying off your existing loans. This temporary pause in your payments could allow you to raise enough money to pay for emergency expenses.
Plans for medical repayment
The hospital may be willing to put you on a repayment program if you have medical bills. This will allow you to spread the cost over time instead of paying them all at once.
How to create an emergency fund
After you have paid your emergency expenses, start planning for the next rainy days. You’ll be better prepared for unexpected costs by creating an emergency fund.
These are some strategies to help you:
- Make a savings goal. It doesn’t matter if it’s $500, $5,000 or more. You can set a deadline and determine how much you will need to save each month in order to reach your goal.
- Set a realistic budget. Calculate how much money is needed each month to pay your rent, mortgage, car payments, and other recurring expenses. You might be surprised at how much money you are spending on unnecessary or frivolous expenditures if you take a look at your finances. To reach your savings goals, cut back wherever possible and stick to the budget that you have created.
- Keep track your spending. An app that tracks your spending can do the rest.
- Make automatic transfers to a savings account. You can set up automatic transfers by creating a separate savings account. Each paycheck will automatically transfer a specific amount into savings. You can do this and your savings will grow automatically.
- You can channel any cash you get as a birthday gift, bonus at work, or other windfall directly into your emergency fund to increase your savings.
- Your emergency fund will grow over time. If you have an unexpected expense, you may have enough cash to pay it.
We chose the best emergency loans based on how we selected them
To determine the best emergency loan lenders, we looked at 17 companies. LendingTree provides a comprehensive and objective analysis of the rates and terms offered by each lender to help you make an informed financial decision.
We compared the following criteria to determine the best lenders for emergency loans:
- Timelines for funding
- Flexible loan terms
- Transparent rates and repayment terms
- There are many loan amounts available
- Low fees