Why personal loans are good for emergencies

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Unexpected bills are bound to pop up every now and then. Your car may break down when you least expect it and require a repair. Or your air conditioner may malfunction and need to be replaced. If you don’t have the cash on hand to cover an emergency expense, you’re not alone. In fact, a recent Bankrate survey found that just 39% of Americans can afford a $1,000 surprise bill

Fortunately, personal loans are a good option for emergency expenses. They can help you get the cash you need quickly. In most cases, you can fill out an application online, get approved shortly after, and receive the money that same day, within 24 hours, or in a few days.

Where can I get emergency loans?

  • Credit unions: Credit unions may lend you money even if you have fair or poor credit. The caveat is that you must be a member of a credit union to qualify for its products and services.
  • Banks: If you apply for an emergency loan from a traditional bank, you’ll likely have to meet higher credit score or income requirements. Also, you may not get the funds as quickly as you need them.
  • Online lenders: Online lenders can process your application entirely online and get you the money you need quickly. Most also allow you to prequalify so you can find out what loan rates and terms you could qualify for before you apply. This can help you avoid a hard credit check that may take a toll on your credit.

What can I use emergency loans for?

The most common uses for emergency loans include:

  • Medical bills: If you or a loved one has to go to the emergency room, for example, and your insurance policy doesn’t cover the trip in full, an emergency loan can cover the out-of-pocket costs. Depending on your insurance policy, out-of-pocket healthcare costs may be anywhere from 10% to 100% of the cost of your service. They can quickly add up to thousands or tens of thousands of dollars or more.
  • Car repairs: No matter what type of car you drive or how new it is, there’s a chance it will require a repair at some point in time. An emergency loan may pay for a simple repair such as new brakes or a more complex repair such as a new transmission. According to AAA, regular repair costs are usually between $500 and $600 or more.
  • Home repairs: A leaky faucet, a running toilet, a broken furnace and cracked siding are all examples of issues you may face as a homeowner. Fortunately, an emergency loan can help you keep your home in optimal shape when systems break down. The cost of home repairs varies greatly but HomeAdvisor estimates that they range from $3,954 to $20,260.
  • Everyday bills: If you lose your job, get your hours cut, or are unable to work for any reason, you may need to take out an emergency loan to pay for your mortgage or rent, utilities, groceries and other bills. While monthly bills depend on a number of factors including your family size and location, the average American family spends $1,889 per month on their household bills.

Why are personal loans good for emergencies?

Personal loans are great for emergency expenses because of their flexibility. Whether your basement floods or you lose your job and need cash to cover bills, an emergency loan can be a real lifesaver.  They’re far more affordable than payday loans and credit cards that often have sky-high interest rates and exorbitant fees. They also have other advantages.

Speed

When you have an unforeseen expense, you may need to pay for it right away. If the engine in your car broke, for example, you’d want to fix it as soon as possible since you depend on your car to get around.

Depending on the lender, you may apply for a personal loan online quickly from the comfort of your own home and receive a quick or even instant decision. Upon approval, you may be able to get the money that same day, within 24 hours or in a few days.

Low interest rates

When you compare personal loans for emergencies to other options, you’ll find that they come with low interest rates. The higher your credit score, the lower the interest rate you’ll be able to secure. A low interest rate can save you thousands of dollars on the overall cost of your loan.

If you don’t have the best credit yet need a personal loan for an emergency, don’t worry. Many online lenders have more lenient requirements than other financial institutions and may also look at factors like your income and employment history when deciding whether to approve you for a loan and what rate

The bottom line

In a perfect world, we’d have the power to plan for every expense in our lives. Since unforeseen expenses are bound to arise, personal loans can be very helpful. A personal loan can allow you to cover unanticipated expenses without the hassle.

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Written by
Anna Baluch
Contributing writer
Anna Baluch is a personal finance freelance writer from Cleveland who enjoys writing about debt, mortgages, student loans, personal loans and auto financing.
Edited by
Loans Editor