Emergency Loan FAQ

Before applying for one, here are some answers to frequently asked questions on this type of last-minute funding.

1. What defines an “emergency loan?”

An emergency loan is funding that can help you cover surprise expenses if you lack the savings to do so.

2. What are some examples of surprise expenses that an emergency loan can cover?

An emergency loan can help you pay the costs associated with many unexpected expenses, including a funeral, medical bills, home repairs, utility bills, car repairs, or even a mortgage or rent payment.

By using an emergency loan, you can prevent eviction, getting your lights or water shut off, missing out on transportation, or ruining your credit by not paying bills on time.

3. What are the different types of emergency loans?

Emergency loans come in many forms. The most popular may be the personal unsecured loan that considers your credit history when calculating the interest rate and terms for your funding. It can offer significant funding from $1,000 to $100,000.

Another type of emergency loan is the secured personal loan. Unlike the unsecured loan that considers credit history, this type of financing uses collateral (your car, home, etc.) to help the lender recoup their cash if you do not repay on time.

If you have a credit card that is not maxed out, you could use an advance as an emergency loan to cover your expenses. You could also get a payday loan that offers quick cash under $500 but comes with high fees and very costly interest rates that can go into the triple digits.

Lastly, title loans are another option for emergencies. You hand over your car title to the lender as collateral, and if you don’t repay the loan, they take your car.

4. What’s the best type of emergency loan?

Every situation is different in terms of credit history, available collateral, how much funding is needed, etc. If possible, though, you may want to opt for an unsecured personal loan for quick and significant funding, lower interest rates, and long terms.

5. What should you consider when shopping for an emergency loan?

To get the best emergency loan to fit your needs, start by looking at the cost. You want an emergency loan with the lowest interest rate possible and few fees (origination, late, prepayment, etc.).

Time is another consideration. If you need the cash today, payday loans are quick (but costly) with funding in minutes. Some personal loan lenders offer funding on the same or the next day.

Think about the terms as well. Can you repay the emergency loan quickly, or do you need more time since you require a lot of cash to cover your expenses? If you need a lot of time, personal loans offer years for repayment.

Don’t forget about the loan eligibility requirements, either? While a personal unsecured loan is ideal, you may not have the credit history to qualify for one. That’s why it’s essential to shop for lenders until you find one that accepts your situation while still offering low-cost funding with favorable terms.

6. Where can you get an emergency loan?

You can get an emergency loan via a bank or credit union and through online lenders like Upgrade, LightStream, Prosper, Avant, SoFi, and Rocket Loans.