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. Other alternatives include home equity loans, payday loans, title loans and credit card cash advances. Borrowers might also choose to get a loan from a family member or friend, who might be especially sympathetic to their situation.
The best lender for an emergency loan is LightStream because they are able to fund loans as soon as the same day you apply, allowing you to take care of your emergency immediately. They also offer up to $100,000 in funding, with APRs as low as 3.99%, which will minimize the extra burden of the emergency.
Where to Get an Emergency Loan – December 2020
| Lender | Funding As Soon As… | Loan Amount | APR |
|---|---|---|---|
| LightStream | Same day | $5,000 - $100,000 | 3.99% - 17.29% |
| LendingPoint | 1 to 2 business days | $5,000 - $25,000 | 9.99% - 35.99% |
| Alliant Credit Union | Same day | $1,000 - $50,000 | 6.49% - 20.00% |
| Wells Fargo | 2 business days | $3,000 - $100,000 | 5.24% - 22.99% |
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.
How to Get an Emergency Loan
- Compare personal loans. You can view your options on WalletHub to find loans with the best rates and other terms for your credit level.
- Check customer reviews. This will help you get an idea of how quickly existing customers received their money. You could also call the loan company’s customer service to inquire.
- Get pre-qualified. Pre-qualification can help you apply only for loans that give you good approval odds. It can be done in seconds and may also speed up the processing of your application.
- Apply online. Online applications typically have the fastest decision times. You may also be able to get fast approval by applying in-person at a branch.
- Wait for a decision. Ideally, you shouldn’t have to wait more than a few business days, and the best lenders will get back to you the same day.
- Wait for funding. Lenders tend to deliver funds 1 to 2 business days after approval.
When applying for an emergency loan, don’t submit your application by mail. That will add an extra 5-7 business days before the lender even considers you. In addition, make sure to avoid predatory lenders. Any loan that has an APR above 36% is not worthwhile.
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: $1,000 - $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: 1 to 7 years.
Home Equity Loan:
Home equity loans can offer more funds than a personal loan because the size 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 repay.
- 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: Over 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 over 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.
Alternatives to Emergency Loans
A loan isn’t the only way to get cash during an emergency. There are a few alternatives you should be aware of.
Emergency Loan Alternative #1: 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.
Emergency Loan Alternative #2: 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 able 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.
Tips for Never Needing 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.