Key takeaways

  • Personal loans can be a great alternative to pay for an emergency expense as they offer the same flexibility as credit cards, but at a much lower cost.
  • Some of the pros of using a personal loan to fund an emergency include quick funding, fixed interest rates and flexible repayment terms.
  • That said, these loans are issued based on credit, so the higher your score, the better rate you'll be able to secure.

A recent Bankrate survey found that just 43% of Americans can afford a $1,000 surprise bill. If you can relate, it can be tempting to resort to swiping your credit cards, however, a personal loan might be a better option.

Personal loans typically come with lower interest rates than credit cards and many lenders offer same-day approval and next-day funding. Interest on these loans is also fixed — so you won’t have to worry about rates going up and down, which often happens with credit cards. Additionally, lenders place very few restrictions on how you can use the funds, making them a good alternative to cover almost any emergency expense.

Why are personal loans good for emergencies?

Personal loans offer quick funding, lower interest rates than other credit products and you can use the funds for almost any expense. This combination makes them a great alternative if you’re in a financial bind.

Quick funding

Unforeseen expenses can arise at any given time and, sometimes, they may require your immediate attention. For instance, if the engine in your car broke, you’d want to fix it as soon as possible since you depend on your car to get around.

Most personal loan lenders offer quick online applications that can be completed from the comfort of your own home. Not only that, but many offer same-day decisions and quick funding. Depending on the lender, you may be able to get the funds directly deposited into your account within hours of approval.

Competitive interest rates

If you take a look at credit card interest rates, you’ll see that they are much higher than those of personal loans. In fact, the average credit card currently has an interest rate just under 21 percent, while personal loans have an average interest rate of just 11.54 percent. However, rates for personal loans can be as low as 4.6 percent, but to secure that rate, you’ll need excellent credit.

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 educational background 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 two 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.

Loan amounts are flexible, too. Depending on the lender you could borrow as little as $1,000 or as much as $50,000+. Plus there are very few restrictions on what you can’t use the funds for.

What are the cons of using loans for emergencies?

Personal loans can be helpful if you’re faced with an emergency. However, they’re not the right solution for everyone.

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 10 percent of the loan amount as an origination fee, which automatically translates into a higher borrowing cost.

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. That means that lenders can seize your asset if you don’t keep up with payments.

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 percent to 100 percent 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 $3,984 to $22,584.
  • 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 $2,003 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.

Top 3 best lenders for emergency loans

These lenders are worth considering if you’re experiencing an unexpected financial emergency and need fast cash:


Upstart offers personal loans from $1,000 to $50,000 with terms between three and five years. Upstart is an ideal emergency loan option because the lender looks beyond your credit score to determine if you’re a good fit for funding. But if you have a solid credit rating, you could qualify for an APR as low as 4.6 percent, and there are no prepayment penalties. Funding is available as soon as the next business day.


Avant caters to consumers with fair credit or limited credit history. They also disburse loan proceeds as soon as one business day following approval, and you can access between $2,000 and $35,000 payable over one to five years. Personal loan APRs are between 9.95 percent and 35.97 percent and an administration of up to 4.75 percent is assessed to each loan. Still, the lender is worth considering in a financial emergency due to its accessibility by those who don’t have perfect credit and need fast funding.


Upgrade is another alternative if you need fast funding to cover an emergency. Like the others mentioned here, loans are generally funded within one business day following approval. But what sets them apart is the extended loan terms – between two and seven years – that can make your monthly payments more affordable. Loan amounts are between $1,000 and $50,000 with APRs from 8.49 percent to 35.97 percent. The minimum credit score requirement is just 600, and you’ll pay an origination fee of 1.85 percent to 9.99 percent.

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, business expenses, the downpayment of a house, 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.