An emergency loan is an unsecured loan that you can borrow whenever you’re in a pinch. It means that it’s quick and easily approved — you can get the money as fast as the next day. The borrowing limit depends on the amount you need for such an emergency, but they typically range between $250 and $1,000.
There are many lenders on the internet if you think it would be a struggle to find one.
Emergency loans are unsecured, which means you don’t need to offer collateral to get approved. However, some lenders offer secured loans as emergency loans. The collateral is just the usual, like home equity or some asset. There are also other loans that you can use as emergency loans, like payday loans and credit card cash advances, which we will discuss later.
The most popular option for an emergency loan is personal loans. They are quick, easy, and negotiable. But remember that these factors depend on the lender. The interest rate, borrowing limit, and repayment terms will change depending on your creditworthiness.
For which purpose can emergency loans be used?
One of the most popular uses of emergency loans is the payment of medical bills. If you’re struggling with an unexpected medical expense, taking out an emergency loan is the way to go. Other purposes include rent and mortgage payments. We’ve all been there; your salary will be late, and you’re not expecting it for a few days, but the monthly rent or mortgage is slowly dawning. The way to mitigate this disaster is to take out an emergency loan.
Another common use of emergency loans is payment of utilities. Nobody wants to get their electricity and water cut off. But sometimes, we accidentally go over our budget, sacrificing our payment of utility bills for some reason.
If you’re currently having that problem, call the lender, and tell them that you want to take out an emergency loan. There are plenty more uses of an emergency loan and the list goes on and on.
Here are some loan options for you if you’re in an emergency.
Personal Loans
A personal loan is a type of loan that has many uses. For instance, you can use it for a car loan, pay for mortgages, or even for emergency purposes. Many financial institutions, like banks, online lenders, and even credit unions, offer personal loans. It works like a typical loan— you have to pay it back monthly with interest.
Some personal loans have fees and other charges, depending on the lender you choose. Personal loans are different from student loans, car loans, or mortgages as they are taken for specific purposes. However, they can be used for any purpose as they are very flexible. With a personal loan, there’s typically a fixed date for the loan repayment.
Title Loans
A title loan is a type of loan that requires collateral. Title loans are popular for two reasons. First, the lender doesn’t check the borrower’s creditworthiness so tightly. Second, since the approval is loose, a title loan can be quickly approved.
So how does it work? The most common form of a title loan is a car title loan. Before you get a title loan, you have to have a car. The lender will take the car as collateral, appraise it, and lend up to 25% of the car’s total value. A car title loan can go up to $1,000, but you could get more depending on your car’s total value.
The usual duration of the loan is 15 to 30 days, although that depends on the lender. In terms of repayment, you can agree with your lender to repay the loan in a lump sum after a few weeks, or you can pay it with a multi-year installment.
Payday Loans
Payday loans are instant cash loans, where a lender offers you a high-interest loan with the principal, a certain percentage of your next salary. This type of loan usually has a high interest rate because of the urgency.
Payday loans don’t require collateral, making them unsecured loans. These loans can be taken online or in physical stores. Also, they are fast and easy to get, which makes them a better alternative for emergency loans.
Final Thoughts
Emergencies can happen anytime, anywhere, and it becomes a real struggle to pay expenses in the most unexpected times. However, you don’t need to struggle with these expenses anymore with the alternative options above. They are all quick and easy and are very convenient when you’re in a pinch.
Author Bio: Darcy Andrew is a journalist that specializes in articles about finance, fashion, and engineering. She also tackles topics about politics and socioeconomics. In her free time, she browses the internet to look for new topics about financing, for example, cash loans that are instant and where to find them or tips on how to improve your credit score.