Emergency loans can provide you with the funds you need to cover an unexpected expense such as a car repair, a broken heater or medical treatment. Let’s take a closer look at what emergency loans are and how they work.
What are emergency loans?
Emergency loans are unsecured personal loans you can borrow to pay for unexpected expenses. If you don’t have the cash to pay for an expense up front, an emergency loan can help you do so. It can alleviate a great deal of stress and allow you to overcome a financial obstacle.
How do emergency loans work?
In most cases, emergency loans are fairly small and range from a few hundred to a few thousand dollars. If you take one out, you’ll receive a lump sum of cash that you can apply toward most emergency expenses. You’ll repay the loan via monthly payments over an agreed-upon term. Since emergency loans are typically unsecured, you won’t have to put up collateral such as your home or car.
Loan amounts, interest rates, fees and requirements vary by lender. Therefore, it’s a good idea to do some research and compare lenders to find the right emergency loan for your needs.
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.
- 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.
- 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.
- 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.
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.
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. A few other benefits of personal loans for emergencies include:
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
Compared to credit cards, payday loans and cash advances, personal loans for emergencies 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 to offer.
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.