How Do I Get an Emergency Loan? 4 Options, From Best to Worst
When the rent is due, you don’t have time to wait for the grinding gears of government.
So could an emergency loan help?
If you’re among the 31.5% of out-of-work Americans who say they couldn’t last a month without the extra $600 a week from unemployment, your budget can’t accommodate a lapse in unemployment benefits without some kind of help.
And while we recommend building an emergency fund, finding a bridge job and tightening your budget, if you need the money this week, an emergency loan may be the lifeline you need to keep your head above water until the next unemployment or stimulus check arrives.
We’ll break down loans that can get money in your hands fast, including what you need to qualify, what kind of interest rate you’d be facing and which offers to avoid.
How to Get Emergency Loans
If it seems like the more you need the money, the harder it is to get it, you’re not imagining things.
Lenders like to lend money to people who can pay it back — with interest. That’s how they make their money.
That’s important to keep in mind if you’re comparing emergency loans — the faster you need the money, the more you can expect to pay in interest and fees.
But there are a few pieces of information (almost) all lenders will require when you apply:
Your name and address (and possibly previous addresses if you recently moved).
Proof of identity, such as a driver’s license.
Your date of birth and Social Security number.
Proof of income, such as pay stubs, and verification of employment.
That last one might leave you thinking you’d be ineligible for a loan if you’re unemployed, but lenders will consider alternate forms of income like Social Security benefits or alimony payments.
But you’ll also need to prove you have a history of making on-time payments, so know your credit score before you apply for any loans.
And before you sign any agreements, weigh all of your options and calculate how any new loan payment would fit into your budget.
Which Emergency Loan Is Right for You?
The average personal loan — which is all an emergency loan really is — clocked in at an interest rate of 9.50% in May. But you can find online loan rates that dip below 6% and predatory lending rates that soar past 300%. You’ll also see variations in loan repayment schedules and loan amounts available.
To help you navigate your options, we’ve listed several types of loans that differ based on how fast you can generally get the loan, how likely you are to be approved and what interest rates you can expect, but specific terms will depend on your financial circumstances.
Here are some options for emergency loans based on your financial situation.
1. You Have Excellent Credit: Online Banks
If you haven’t worked with an online bank before, you may be pleasantly surprised to find out how quickly they can move.
By being exclusively digital, it’s possible for online banks to approve a personal loan in minutes. But be sure to ask the lender how long the loan disbursement will take.
Although some lenders can transfer money to your account by the end of the day, most take at least one or two business days for the loan disbursement — and sometimes as much as seven days.
But to qualify for the low interest rates online banks advertise, you’ll need a credit score of 600 or better.
The minimum loan amount is typically $1,000 to $2,000, so you might want to reconsider this option if you need a lot less — overborrowing just leaves you paying back more in interest.
2. You Need a Little More Help: Credit Unions
Credit unions are member-owned nonprofits, which typically means they offer lower fees and lower interest rates on loans compared to traditional banks, which are profit-driven.
And if your credit score is less than stellar or you need some help navigating the loan application, credit unions are small enough to offer personalized services. Credit union officers can help you choose the most beneficial loan option without pressuring you into high-profit products.
If you’ve been a loyal, longtime member of a credit union, you may be able to get your loan expedited.
But if you’re a newer member or just joining, you should expect the loan process to take longer — up to seven business days before you see any money. Ask at the branch about their timeline before you submit an application.
3. You Need the Money Today: Cash Advances
If you already have a credit card, there’s a good chance your issuer offers a cash advance.
And because you already have the card, you don’t have any applications to fill out or wait time — with most credit cards, you can get cash through a bank withdrawal or at an ATM.
But that convenience comes with tradeoffs, starting with a tight limit on how much money you can access — expect about 25% of your credit limit.
And you’ll face transaction fees plus extra-high interest rates — even higher than your regular credit card interest rate — that will accrue daily.
Consider using your credit card directly instead of the cash advance option. You’ll at least get the money at a lower interest rate — and without the fees, so long as your payee accepts plastic.
But if you need cash tomorrow and you can make a concrete plan for repaying it, a credit card cash advance could offer a quick fix.
4. Your Last Resort? Anyplace But a Predatory Lender
Ever watch a nature show? Then you’ll understand why you want to steer clear of a predatory loan, since the predator is the lender and the prey is… you.
But we get it: Predatory lenders make their deals sound so enticing: No credit checks! No income! No problem!
A sure sign of a predatory lender: They call you to offer you money, unsolicited. Legitimate lenders never "guarantee" you’ll get a loan before you apply.
Only that bait sets you up for a trap that’s nearly impossible to escape, with interest rates in the triple digits and short repayment periods that force you to take out more loans to cover the last one’s payments.
These loans are also known as payday loans, as in they’ll provide a cash infusion to tide you over until you get your next paycheck.
For example: If you needed to borrow $500 for two weeks, a predatory lender could charge you $20 for every $100 borrowed (limits vary from state to state). So in two weeks, you’d owe $600 — assuming there aren’t any other fees or penalties tacked on. Are you sure you’ll have an extra $600 in two weeks? If not, you’re borrowing again.
Once caught in that vicious cycle, it’s tough to escape.
So be wary if a lender rushes through an application without asking about your credit history, pressures you to accept a loan on the spot or won’t provide a full explanation of fees and penalties. You’re better off walking away than sacrificing your financial future for a temporary cash influx.
But you still need money to put food on the table and keep the lights on, right? If you can’t qualify for a quality loan, you may need to seek alternative emergency sources — you can start with these seven resources to help you meet essential needs until that check comes through.
Tiffany Wendeln Connors is a staff writer/editor at The Penny Hoarder. Read her bio and other work here, then catch her on Twitter @TiffanyWendeln.