- Fees: Emergency loans can have many fees, including origination fees. These fees can greatly add to your loan’s total cost and make it more difficult to get out of debt.
- Collateral: While personal loans, cash advances, and PALs are unsecured, some emergency loans are secured and require collateral. If you fall behind on your payments, you risk losing your property to the lender. Before choosing a loan that requires collateral, ensure that you have a repayment plan and budget in place.
- Time to Fund: Part of the reason why payday loans are so heavily used is because you can get cash on the spot. That’s a big advantage over some personal loans that can take several days to process. However, some personal loan lenders and PALs do offer quick loan disbursement, so shop around until you find the right match for you.
- Loan Amount: Most emergency loans are relatively small – often between $200 and $1,000. If you need more than that, personal loans may be your best option since they usually have much higher loan maximums.
- Credit Requirements: If you have good to excellent credit, you have a lot more options than someone with bad credit. With a strong credit score, you can qualify for personal loans with relatively low interest rates, and you can have years to repay the loan. By contrast, emergency loans for bad credit tend to have high interest rates and very short terms.
If you have poor credit or no credit history at all, it can be difficult to find a lender willing to work with you. However, there are some ways to improve your chances of qualifying for a loan:
- Add a Cosigner: If you have a friend or family member with excellent credit and a reliable source of income, adding them as a cosigner on a loan could help you get approved, even if your own credit is lacking. A cosigner will act as a guarantor on the loan, meaning the lender can require them to make payments if you fall behind.
- Use Collateral: If you cannot qualify for an unsecured emergency loan, you may be eligible for a secured loan if you have some form of property to use as collateral. You can use your car, motorcycle, or a boat as security on a loan.
- Visit a Credit Union: As non-profit organizations, credit unions serve their members. They often have less stringent credit requirements than other lenders, and they may also offer free financial counseling.
1. Ask for Help
While reaching out to friends or family members for financial assistance can be difficult, it can be a much better solution than turning to predatory, high-interest loans. “Borrowing from family doesn’t always feel like the best thing, but if you’re talking about the difference between being evicted from your apartment, I say look to family,” says Cole.
If you do ask for help, make sure you’re both clear on whether the money given to you is a gift or a loan. If it’s a loan, discuss repayment terms, whether it must be repaid with or without interest, and what payment terms they expect.
2. Apply for a 0% APR Credit Card
If you have good to excellent credit, you may qualify for a 0% APR credit card. Some credit cards offer special 0% APR intro periods, typically 12 to 18 months. If you can pay off the balance before the 0% APR period ends, you won’t be charged interest at all. But be careful; if your balance isn’t paid off by the end of the intro period, you’ll need to pay high credit card ount.