4 Emergency Loan Options You May Want To Consider

By: Aaron Robbins0 comments

According to a recent NAB research, more than 1 in 10 Aussies don’t have enough money for an emergency fund. As prices in the market continue to rise, it would be very challenging to keep up with your day-to-day expenses; all the more if you have expenses that come up unexpectedly.

If you belong to these statistics, taking out an emergency loan might be the only option for you. These loans can grant you fast access to cash, which you use to pay off emergency expenses.

What is an Emergency Loan?

An emergency loan is a type of personal loan that can help you cover your unexpected expenses. This type of loan can be used to pay for emergencies like medical bills, car repairs, funeral costs, etc.

This loan can give you fast access to cash.

Types of Emergency Loans

There are a few different types of emergency loans that you can take out. Each has its own set of terms and conditions, so it’s essential to understand the differences before deciding which one is right for you.

Personal Loans

You can get personal loans through banks, credit unions, and online lenders. Once your loan application is approved, you will receive the loan amount as a lump sum. You’ll have to repay it in monthly installments, including the interest and fees agreed by both you and the lender.

One advantage of getting a personal loan is that it can let you repay the amount over an extended period than other options. However, it’s vital to know that repayment terms, interest rates, and fees vary by lender. So it’s best to take your time to shop around and look for the lender that best suits your current financial situation. 

Personal loans can also give you the benefit of quick funding. Several lenders can grant your application within 24 hours and process the loan into your account. Plus, if you have a good credit score, you will get the best terms on your loan.

Credit Card Cash Advances

Yes, you can use credit cards during emergencies only if you know how to handle them responsibly. 

Credit card cash advances are considered short-term loans utilized from the credit line on your existing credit card.

Several credit card companies offer cash advance as a feature in addition to your traditional credit card that can give you fast access to cash from a bank branch or an ATM. Furthermore, the cash advance limit tends to be based on the set maximum amount or the current percentage of your credit card’s limit.

Payday Loans

Payday loans can provide you with the cash you need fast. However, a lender of payday loans can let you borrow only small amounts for this type of loan. The repayment term for a payday loan is extremely short compared to other emergency loan options, ranging from one to two weeks or by the next payday.

Title Loans

Another option you can choose is a title loan. You can qualify for this loan without going through a hard credit check, but it’s a secured loan.

When it comes to title loans, you will be required to pledge the title of your vehicle as collateral. Not being able to repay the loan at the end of the loan term would mean that the lender can repossess your vehicle. It’s necessary to settle your outstanding debt.

This type of loan is similar to a payday loan. It can grant you only small amounts with a short repayment term. The only difference is that it requires you to pledge collateral.

Pro-Tip

When assessing which loan option to choose, it’s best to focus on the interest rates and fees. Some loan options can equate to an annual percentage rate (APR) of 300%, making it challenging to get out of it.

Also, emergency loans may come as secured or unsecured. In secured loans, you will need to pledge your property as collateral to help secure the loan if, by any chance, you fail to pay it back. On the other hand, unsecured loans are usually granted to a borrower significantly based on their creditworthiness.

Taking Out an Emergency Loan with Bad Credit

Strong credit can help you get any loan with the best rates. However, if you have bad credit, it might be challenging for you. Below are some ways you can use to improve your chances of getting approved:

Use Collateral

As mentioned earlier, an emergency loan can either be secured or unsecured. If you have bad credit, opting for a secured emergency loan can improve your chances of qualifying. You can use your property, a house, or car to pledge as collateral.

Add a Cosigner

If someone in your family or friend circle has a strong credit score and a stable source of income, add them as a cosigner. A cosigner is considered a guarantor on the emergency loan. It means that the lender can make them pay for the loan if you fall behind.

To Sum It Up

You may want to consider getting an emergency loan if you don’t have a sufficient emergency fund or don’t have any. This type of loan can help provide fast access to cash that can help cover unexpected expenses. 

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