What Is an Emergency Loan and How to Get One Quickly

Almost everyone has experienced times when they needed to quickly obtain some extra money to handle a financial emergency. Sudden unexpected medical expenses, or home or auto repairs that need to be taken care of immediately, can put even the most financially responsible individuals in a bind.

Whatever the reason, you need some extra cash right away. An emergency loan may be just the help you need.

What Is an Emergency Loan?

An emergency loan is an urgent loan that an individual can take out quickly when they need some extra money to cover sudden, unexpected expenses. Among the most common things that trigger a need for an emergency loan are medical bills and car repair bills.

The simple fact is that many people live paycheck-to-paycheck and have very little, if any, savings. If they're suddenly informed that their car needs $1,000 in repairs, their first thought may be, "I don't have $1,000!" The solution to that problem can be an emergency loan.

What Are the Common Types of Emergency Loans?

As noted above, common types of emergency loans are payday loans, title loans, and personal loans. Larger loan amounts and longer repayment terms are available with title loans and personal loans, as compared to payday loans. A payday loan might be for only $1,000 and have to be repaid within one or two weeks, while a personal loan might be for $20,000 or more, and have repayment terms of several months to a few years.

Payday Loans

Payday loans are so named because they are short-term loans that are intended to be repaid on the borrower's next payday. Thus, the usual timeframe for repayment extends no longer than one month. Payday loans are typically small emergency loans - common ranges are $100-$1,000. The borrower usually has to pay very high interest rates (APRs as high as 500% or more).

Title Loans

Title loans are available if you own your car free and clear. Lenders who make title loans take the car title as collateral for the loan and keep it until the loan is completely repaid.

Borrowers can usually borrow a significantly larger amount of money with a title loan than with a payday loan - as much as several thousand dollars. The maximum title loan amount is normally a set percentage of your car's value, usually somewhere between 25%-50%. Title loans typically have a repayment term of up to one month.^[1]

Personal Loans

Personal loans are usually for substantially more money than what a borrower can get with a payday or title loan. Because higher monetary amounts are borrowed, the borrower usually repays the loan by making monthly payments over a period of several months to several years.

Personal loans are usually unsecured. They usually carry much lower interest rates than payday loans or title loans, but are harder to qualify for - they may not be easily available to borrowers with bad credit.

Credit Card Cash Advances

If you have a credit card with available credit and that allows you to take cash advances (nearly all credit cards do), then you can just give yourself an emergency loan with a credit card cash advance. However, the amount of cash you can borrow is often limited, and the credit card issuer typically charges a significantly higher interest rate on cash advances than the rate on regular credit card purchases. If you're considering taking a credit card cash advance, carefully check your card issuer's terms.

What Can an Emergency Loan Be Used For?

There usually aren't any restrictions on how you spend emergency loan money. It can basically be used for anything. But, because of the high rates you usually have to pay for an emergency loan, it's not a good idea to spend the money on a clothes shopping spree or a weekend trip to the beach.

Here's a list of some of the most common uses of emergency loan funds:

Car or home repairs
Medical expenses
Utility bills
Veterinary bills
Rent or mortgage payment
To cover expenses during temporary unemployment

Although it's fairly uncommon, some emergency lenders do impose some restrictions on how the money is spent. Just be sure to carefully review all the terms before signing a loan agreement.

What Are the Eligibility Requirements for an Emergency Loan?

Although these vary from lender to lender, generally speaking, the requirements for most emergency loans can be fairly simple and straightforward. The basic eligibility criteria you need to meet are as follows:

Be an adult (18 or older)
Have a valid, government-issued ID (e.g., driver's license, passport, government ID)
A verifiable source of income; monthly income of at least $1,000
An active checking/savings account
Verifiable residential address, phone, and email address

And in most cases, you don't need to have a good credit score to qualify for an emergency loan.

Also, the documentation you will need to apply for an emergency loan includes:

Proof of income (such as a recent pay stub)
Copies of your ID, and proof of residence (such as a recent bank statement or utility bill showing your address)
Vehicle title and registration, if you're applying for a title loan

Will Getting an Emergency Loan Affect My Credit?

Applying for an emergency personal loan can lower your credit score by a small amount. This is because the lenders usually run a credit check on you, which will negatively affect your credit history. But when you've made timely repayments on this type of loan, this will be considered a good payment history and improve your credit score.^[2]

Requesting a payday loan, on the other hand, may not have any impact on your credit score. The lenders usually won't check or report anything on your credit history so you will probably not see any impact on your credit.

But if you fail to repay your emergency loan on time, the lender may report it to the credit bureaus, or "sell" your loan to collection agencies who will then do the same, and you will see a dip in your credit rating.^[3]

Can I Get an Emergency Loan With Bad Credit?

You can qualify for emergency loans, such as a payday loan or title loan, even if you have bad credit or lack credit history. Payday lenders consider factors besides just your credit score - such as how long you've been employed, how long you've lived at your current address, and how much money you make. Title loan lenders also don't exclude bad credit borrowers - because they hold the car title as collateral to secure the loan.

Where Can I Find an Emergency Loan?

Emergency loans are accessible through many different types of financial service providers. Below is a list of the ones that most people seek help from and are most likely to help you get the quick loan you need:

Online loan services:

Their digitally processed approval and authorization procedures for online loan applications go much more quickly than doing an in-person loan application at a bank or other financial services firm. And they usually offer quick application processes and are willing to loan money to people with bad credit or no credit.

Banks and credit unions:

These are safer options but with more stringent eligibility criteria. Banks typically need you to reach a certain credit score threshold, and credit unions require you to be their member, it usually takes a longer time for you to apply and get approved for loans from these institutions.^[4]

Credit card issuers

As said above, you can borrow money against your credit card instantly in the form of a cash advance. This works as withdrawing money directly from your credit card, or your issuer sends you a convenience check to deposit. It can be taken out instantly, but it is also very expensive.^[5]

Universities:

If you are a university student or employee, you can check to see if there is any emergency loan financial aid program offered at your university. These are usually short-term small-amount loans with no interest. Your eligibility is determined by the office of financial aid in your university, but some will ask you not to have an outstanding debt when you apply for an emergency loan.^[6][7]

What Should I Consider When Choosing an Emergency Loan?

The terms and cost of borrowing money with an emergency loan can differ widely from one lender to another. There are several key factors to consider when reviewing a loan offer from a specific lender. Carefully compare offers to make sure that you get the best loan deal possible.

Interest Rate: The interest rate charged on a loan is the primary cost that you pay for borrowing money. You want to keep it as low as possible. Compare the annual percentage rate (APR) offered by different lenders.
Other Fees: In addition to interest rate charges, nearly all lenders charge additional fees that increase your total borrowing cost. The most common emergency loan fees are loan origination fees and potential late payment fees.
Loan Repayment Term: Having a longer term to repay a loan will make loan payments, such as monthly payments, lower. However, the longer you take to repay a loan, the more you'll pay in interest charges. First and foremost, whatever loan repayment term you agree to, make sure that you'll be able to afford the payments or, with loans that just have one repayment-in-full payment, that you'll have the money to repay the loan in full by the specified date.
How Quickly You Can Get Funds: "Emergency" usually means you need to get money as fast as possible, so check when you can expect to receive loan funds in your bank account once approved for a loan.

What Are the Steps for Getting an Emergency Loan?

Unless you're taking a cash advance out from your credit card, which can be done in an instant if you're allowed to get one, there are several steps you need to take before you can get an emergency loan.

The first thing you need to do is to check your financial status and credit score. Then plan carefully about what kind of loan you may need to borrow and how you're going to use and repay it.

Then you should do thorough research and find the nearby in-person or online loan options that may fit your needs. Inspect their loan rates, terms and conditions carefully and pick the one that is most suitable for your situation and easy for you to repay.

Once you've chosen the financing option you like, you can get the required documents ready and submit your loan application to the lender. If they approve your loan request, you will need to sign an agreement with them and after that, wait until they give or transfer the loan money to you.^[8]

Online loan services like WeLoans can simplify the whole process for you. We work to make the process of getting an emergency loan as quick and easy as possible. Here's our simple, three-step process:

Fill out our loan request form - Fill out WeLoans' short, simple online form. WeLoans will quickly match you with the most suitable lenders.
Receive loan offers - WeLoans will send you all the information on loan offers that potential lenders are willing to make you. Review the offers to find out how much you can borrow and what the loan terms are.
Receive your emergency cash - After you complete and sign the loan agreement of the lender you select, you should receive money in your bank account as soon as one business day.

How Quickly Can I Get an Emergency Loan?

Getting an emergency loan can be very quick, especially if you borrow it from an online loan lender or broker. They process your loan request instantly and make swift loan approval decisions. Once approved for a loan, you should have the cash within one business day. Sometimes it's possible that you apply for an emergency loan early in the day, you may even receive your money the same day.

What Are Some Good Alternatives to an Emergency Loan?

An emergency loan may provide exactly the financial help you need. But taking on a debt does add to your existing financial responsibilities. If you don't like it, here are some alternatives to getting an emergency loan:

Asking family members or friends to lend you some money (they'll probably charge less interest than an emergency loan lender)
See if your employer will give you an advance on your next paycheck
Try to work out a payment plan for the emergency expense you need to cover with the provider of the service you need, such as your doctor's office or auto repair shop
Check for local charities, both private and government-funded, that may be able to help you (some churches maintain a fund to help church members who have temporary financial problems)
Taking out a HELOC (home equity line of credit). It is secured by your home equity so it has lower interest rates and they can be tax deductible.^[9]
Borrowing from your 401(k) plan, your retirement account balance.

The Bottom Line

It's not always possible to be prepared for sudden, unexpected financial emergencies. But whether with a credit union, bank, credit card companies, or online brokers like WeLoans, you will get the opportunity to find and compare options to help you find the best deal for an emergency funding loan.

A valuable lesson you can learn from experiencing a financial emergency is the importance of saving money regularly, so that you have some financial cushion against the unexpected.

What is an Emergency Loan?