What is an Emergency Loan?
An emergency loan is any loan that a borrower can get on short notice in order to pay for unexpected expenses such as hospital bills, auto repairs, fixing storm damage on a house or burying a loved one. There are a number of different types of loans that can serve as emergency loans, the best of which is a personal loan.
How Emergency Loans Work
With an emergency loan, you borrow a lump sum of money to pay for an unexpected expense, and you then have to repay the loan within a certain period of time, usually in monthly installments. Many emergency loans are designed to provide quick approval and funding, but keep in mind that some loans may come with short payoff periods and high interest rates.
The best personal loans for emergencies have fast funding timelines, some as soon as the same day you apply, and loan amounts up to $100,000. The best loans also have relatively low minimum APRs and long repayment periods.
Emergency Loans Comparison
| Lender | Funding As Soon As | Loan Amount | APR |
|---|---|---|---|
| LightStream | Same day | $5,000 - $100,000 | 7.44% - 25.79% |
| LendingPoint | 1 to 2 business days | $1,000 - $36,500 | 7.99% - 35.99% |
| Alliant Credit Union | Same day | $1,000 - $100,000 | 8.99% - 11.99% |
| Wells Fargo | 2 business days | $3,000 - $100,000 | 7.24% - 24.74% |
| Best Egg | 2 business days | $2,000 - $50,000 | 6.99% - 35.99% |
| OppLoans | 2 business days | $500 - $5,000 | 160% - 195% |
| Upgrade | 2 business days | $1,000 - $50,000 | 7.74% - 35.99% |
Below, you can find out how to get an emergency loan, as well as learn about what types of emergency loans are available, what alternatives exist, and how to avoid the need for an emergency loan altogether.
Types of Emergency Loans
Personal Loan
A personal loan is a loan that you can use for just about any purpose, as long as it’s not illegal. So you’ll be able to use it for any kind of emergency expenses.
- Funding timeline: Usually less than a week; as soon as same day with a few lenders.
- Amounts available: $250 - $100,000.
- APRs: 4% to 36%. You’ll need excellent credit to get an APR on the low end.
- Origination fees: 0% to 8% of the loan amount. You’ll need a score of at least 660 to get a loan that doesn’t have an origination fee.
- Payoff period: Up to 7 years.
Home Equity Loan
Home equity loans can offer more funds than a personal loan because the size of the loan is based on how valuable your house is relative to your mortgage balance. The drawback of using a home equity loan for an emergency is that you risk foreclosure if you can’t pay the loan back. So you could potentially put yourself into an even bigger emergency if you’re unable to pay.
- Funding timeline: 2 to 4 weeks (useful for emergency expenses that aren’t immediate).
- Amounts available: Based on home value, minus mortgage balance.
- APRs: 4% - 8%.
- Payoff period: 5 to 30 years.
Credit Card Cash Advance
A cash advance essentially allows you to get a loan from your credit card issuer at an ATM or bank branch, or by using a special check. The problem with cash advances is that they’re incredibly expensive. They don’t have a grace period like normal credit card purchases do, either, so cash advances start accruing interest immediately.
- Funding timeline: Instantly at an ATM with an account PIN.
- Amounts available: Up to your card’s cash advance limit.
- APRs: Around 21% on average.
- Fees: 2% to 5% of the amount you withdraw.
Loan from Family or Friends
In an emergency, you may want to turn to the people closest to you rather than a company. Friends and family know about your life, so they’re more likely to be sympathetic to your situation. As a result, you’ll have a better chance at getting cash very quickly, along with low interest (or even no interest).
Plus, the person you borrow from is likely to be more flexible about when you need to pay the loan off, considering your emergency circumstances. Just be sure to write up a clear agreement that holds you accountable for repaying.
Payday Loan
Payday loans are short-term loans repaid from your next paycheck. Companies that offer them advertise easy approval, even for people with bad credit. However, payday loans aren’t worth getting, even in an emergency. The fees they charge are incredibly expensive. That will put you in an even worse situation than you were in with the initial emergency.
- Funding timeline: As soon as the same day you apply.
- Amounts available: Usually $1,000 or less.
- APRs: Frequently 400%+.
- Payoff timeline: Paid with your next paycheck.
Title Loan
Title loans are secured by the borrower’s vehicle. That means you’ll have to give up possession of your car if you’re ultimately unable to repay what you borrow. It’s not a good idea to risk losing your vehicle to get yourself out of a different emergency.
- Funding timeline: As soon as the same day you apply.
- Amounts available: Up to 25% to 50% of your car’s value.
- Costs: Up to 25% of the amount you borrow.
- Payoff period: 15 to 30 days, though you may be able to “roll over” the loan to a new month for an additional cost.
Home Equity Line of Credit
A HELOC is very similar to a home equity loan, except that you use it like a credit card, borrowing up to a certain amount any time you want, with no requirement to borrow. It usually takes several weeks to get a HELOC. But if you already have one, it’s a good source to draw from in an emergency.
Credit Card
If you’re able to pay your emergency expense with a credit card, that allows you to make the purchase immediately while financing it over time. However, credit card APRs tend to be high, with an average over 19% for new offers.
A better option would be to use a 0% APR credit card. But if you don’t already have one where the intro period is still active, it may take a few weeks to get a new card in your hands. Plus, you’ll need good or excellent credit to get a card with a 0% intro APR. However, you can always make a balance transfer from your regular credit card to a card with a 0% intro balance transfer APR later on.
How to Get an Emergency Loan
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Check your credit
Check your credit report to make sure there aren’t any errors that need to be corrected. Your credit history will be one of the most important factors in the approval process. You can also check your credit score for free on WalletHub to get a sense of which lenders’ minimum requirements you’ll meet.
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Determine how much you need to borrow
Consider how much you need to borrow and how much you can afford to pay each month. Remember that you’ll have to pay interest over the life of the loan, so only borrow what you need. You can use WalletHub’s personal loan calculator to estimate your monthly and overall payment based on how much you need to borrow.
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Pre-qualify and compare offers
Pre-qualification shows you which lenders may approve you and what rates you may qualify for. Pre-qualification won’t affect your credit score, since it only involves a soft inquiry into your credit. It may also speed up the application approval process. You can check to see if you pre-qualify for loans with multiple lenders at once using WalletHub’s free pre-qualification tool. In addition, you should take the time to compare rates between lenders because it could end up saving you money in the long run.
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Apply online
Applying for a loan online is the best way to streamline the approval process. Some lenders may even approve you within minutes of submitting your application.
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Wait for approval and get funded
Once you’ve submitted your application, you’ll have to wait for approval. You may be approved instantly, or it might take a few business days. You’ll typically receive the funds within a few business days after getting approved, but there are some lenders that offer same-day funding if you meet certain requirements.
Tips for Never Needing an Emergency Loan Again
Emergencies can happen at any time, and it can be both stressful and expensive trying to come up with the money to pay for an unexpected expense. Needless to say, it’s best to be prepared for an emergency situation. With that in mind, we put together some tips that you can use to ensure you never need an emergency loan again.
Build up an emergency fund
Save as much as you can afford to each month, and you won’t have to accept whatever terms lenders are willing to offer in an emergency situation. You can use your own funds to put out financial fires in the future.
Cut back on your spending
Everyone needs to have some fun and enjoy creature comforts, but there are lots of luxuries we can live without. If you’re able to reduce your spending on non-essential things, you’ll have more money for emergencies.
Work extra
Putting in a few more hours or getting a part-time side job can help you increase your income and build up your reserve funds.
Crowdfund
There are several platforms, such as GoFundMe, where you can ask people to assist you with emergency expenses. If you have especially generous family and friends, you might be able to avoid a loan.
Those tips are nice to know for the future. But if you’re facing emergency expenses right now and need a loan fast, you might also want to check out loans that offer same-day approval and funding.
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