Personal Loans
An emergency loan is an unsecured personal loan that is usually taken out spontaneously from online lenders. It is often used to cover unexpected costs such as medical expenses or car repairs. The amount of the loan depends on the needs of the borrower. They are usually quite low, between $200 and $1,500. Due to the urgency involved, you can often expect to fund the money after just one day.
What Can I Use an Emergency Loan For?
As the name suggests, emergency loans are for unexpected events and should be contracted in absolute need only. Some emergencies that need urgent credit could be:
Medical Expenses
Whether a broken leg, a viral infection or any other emergency: Most of the time, you cannot foresee a stay in an emergency room or other sudden medical bills. With an emergency loan, you can pay for such spontaneous expenses for the time being.
Mortgage or Rent
If you experience a sudden job loss, for example, it is a good idea to prioritize your spendings. Especially the monthly payments for rent and your mortgage payments should not be left out. In order not to lose the roof over one’s head, an emergency loan can come to the rescue.
Home or Car Repairs
A storm caused damage to your house, your washing machine went out of order, or your car broke down on the way to work — spontaneous repairs can be expensive. But if you do not have the cash, an emergency loan often is the last resort.
End of the Month
Even if you can handle unexpected repairs at the time, they usually leave a big dent in your budget. Sometimes, the next emergency happens before you got the chance to fill your savings account again. Or in some occasions, they all happen one after another.
Whatever the reason, things can get a bit tight at the end of the month. So, if you do want to eat cheap meals for the next weeks in order to pay your bills, an emergency loan can make sense to ease the situation.
What Types of Emergency Loans Are There?
Emergency loan basically is a synonym for different kinds of loans you apply for in case of unexpected expenses you cannot afford. Here are the most common types of emergency loans:
Personal Loans
For an unsecured personal loan, you can qualify with your credit score and history, and your income. Typically, these personal loans are unsecured, so no collateral is required. The interest rates and fees are also rather low for an emergency loan. You can repay those personal loans with monthly payments.
Payday Loans
Payday loans get their name from the fact that they are usually due on the next payday. This means that the borrower has a maximum of one month to repay the money. They usually have very high-interest rates and usually, the maximum loan amount is $500. Even if you do not have to deposit collateral for such a loan, pay attention to the credit terms. They often come with expensive fees and interest rates of up to 400%. Therefore, you should only take advantage of such an offer in an absolute emergency.
Title Loans
With this loan, you transfer the title of collateral to the lender. The most common variant is to use the title of your vehicle as collateral. Neither a credit check nor proof of income is required for this loan, even with bad credit. However, if the repayment is not made in time, your car is gone.
Credit Card Advances
With a credit card cash advance, you withdraw cash from your credit card account that is not actually there. In other words, you take out a loan from your credit card. However, the use of this option is limited to a certain amount and is associated with high-interest rates and fees.
Where Can I Get an Emergency Loan?
Depending on the type of emergency loan you can choose between many different potential lenders. Since with online lenders, the approval and authorization procedures are processed digitally, they are much faster than analog banks. In addition, many online lenders offer free pre-qualifications that do not lower your credit score.
Loans for Emergencies – Quick Financial Help
An emergency loan is a regular personal loan, which has to be paid out very quickly. Therefore, several lenders have considered ways to provide funds without long qualification periods. Because of a higher risk for the lenders, high fees, collateral, or other payment conditions are often added. Unless you have an emergency fund set up, you often have no choice but to take out such a loan. Therefore, it is good that there are also reasonable emergency loans such as unsecured personal loans.
This article is for educational purposes only and is not intended to provide financial, tax or legal advice. You should consult a professional for specific advice. Best Egg is not responsible for the information contained in third-party sites cited or hyperlinked in this article. Best Egg is not responsible for, and does not provide or endorse third party products, services or other third-party content.