Do you have the funds to cover an unexpected financial emergency? A recent Bankrate survey found that just 44% of Americans can afford a $1,000 surprise bill. If you can relate, it can be tempting to resort to high-interest credit cards or borrow the funds from friends or relatives. But a personal loan might be a better option.

You can get the cash you need quickly — most lenders have a simple online application process. And many personal loans come with flexible terms and monthly payments that won’t stretch your budget too thin.

Why are personal loans good for emergencies?

Personal loans are great for emergency expenses because of their flexibility. They are far more affordable than payday loans and credit cards that often have sky-high interest rates and exorbitant fees.


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 your rate will be.


Personal loans also come with flexible repayment terms. Most lenders offer loan terms between one and five years, which is beneficial for a few reasons.

You’ll likely get an affordable monthly payment that works for your budget, especially if you get a competitive interest rate. And you won’t pay a fortune in interest like you would with a credit card since it’s already factored into the monthly payment when you take out a personal loan.

What are the cons of emergency personal loans?

Personal loans can be helpful if you’re faced with an emergency. However, they won’t always be the best option. If you aren’t careful, they could wind up being an expensive debt that costs you much more than your emergency.

Best rates reserved for good credit

Although there are dozens of lenders that work with borrowers who have bad credit, you may face higher rates. They won’t be as high as most payday loans — but they may rival high-interest credit cards. To qualify for the best rates, you will need to have good to excellent credit, which is typically considered a score of 670 or higher. If you don’t, a personal loan may still be a good option for an emergency, but you should also consider other alternatives as well.

Additional fees can be a huge added cost

There are some personal loans that have no fees. But many will have late fees alongside origination fees and prepayment penalties. Late fees can be avoided, but an origination fee — which is wrapped into the annual percentage rate of your loan — is a common cost. Lenders may charge up to 8 percent of the loan amount as an origination fee. When they do, you will wind up borrowing more to cover your emergency expense.

Collateral may be required

Personal loans are frequently unsecured, which means you are approved based on your credit and income. However, some lenders may require collateral — additional property that secures your loan in case you default. This is frequently the case when you turn to bad credit lenders. Without collateral, you may face higher rates or may not be approved for the loan.

What can I use emergency loans for?

The most common uses for emergency loans include medical bills and repairs, but they can be used to cover almost any expense.

  • 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 $3,977 to $22,258.
  • 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.

Where can I get emergency loans?

Emergency loans are offered by credit unions, banks and online lenders. Here’s what you should know about each option to decide which is best:

  • 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 multiple hard credit checks that may take a toll on your credit.

The bottom line

While no one wants to go into debt following an emergency, personal loans are a good alternative to credit cards or just letting the bills pile up.

If you’re facing an immediate financial need, take a few minutes to compare loans from lenders known for quick approvals, then apply to the one that best meets your needs. Once you’ve paid your immediate bills, you can start coming up with a plan for paying off your new loan. You should also start thinking about building an emergency fund to avoid similar issues in the future.

Frequently asked questions

    • You’re welcome to tell your lender that you’re in an emergency. This could help, but could also backfire because some lenders might be hesitant to lend money if you’re admitting you’re in a bind and might have trouble making payments. You’re better off applying for a loan from a lender known for quick approval and funding.
    • Many personal lenders that specialize in quick approvals and quick funding can get money to your bank account as soon as the next business day. Some even offer same day funding if you apply early in the day and have exemplary credit.
    • Most lenders do place limits on how you can use personal loan funds. However, they are usually limited to saying you can’t use the borrowed money for college tuition, illegal activities, or gambling.Given that most emergency loans are personal loans, you can reasonably expect to be able to use them for whatever financial hardship you’re facing, such as a car repair or upcoming bill.

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