7 Quick Loan Options for Emergency Situations
What wouldn’t you do for a quick loan right now? Most people do anything possible to get quick cash, especially when they’re faced by an emergency.
According to a survey, about 17% of Canadians have less than $1,000 saved up for emergencies.
Considering that a lot of emergencies exceed $1000, most people would borrow money if faced by an emergency. If you fall into this category and are currently looking to find a quick loan, the first thing you must understand is that most of these kinds of loans that promise quick and easy access come with steep costs.
Some are better than others, which is why we’re going to compare seven options so you can make an informed decision and choose the best one for you.
What Are Emergency Loans?
If you don’t have enough savings to cover emergency expenses, you have the option of getting a quick emergency loan to cover your unexpected cost. Emergency loans come in many forms including payday loans, personal loans, credit card cash advances, among others. Unlike mainstream loans such as mortgages, emergency loans can be used for various purposes.
In most cases, once a person applies for an emergency loan, the funds are sent to their bank account within a business day or two upon approval. The duration of the process will highly depend on the lender, loan application, and the requirements. It’s imperative for you to read the fine print of the loan terms and conditions before you sign it to avoid unexpected fees, penalties, and charges later on.
While an emergency loan may help you get through your current financial hurdle, you need to understand that the loan is likely to come with high-interest rates. This is more likely to happen if you have a low credit rating and choose to get an unsecured loan. A good credit score, however, may be able to get you a higher amount for lower interest rates.
7 Types of Emergency Loans
If you’re currently in need of an emergency loan, there are several places you can reach for some quick cash. Here are 7 types of these kinds of loans for you to choose from.
1. Personal Loans
Personal loans are one of the best ways to get an emergency loan and one of the upsides of getting one is that they come with fixed interest rates. Unlike other mainstream loans that have variable interest rates that could hike at any moment, with a personal loan, you’ll know exactly what you’ll be paying every installment. The amount of money and interest rate you get from a lender will depend on your creditworthiness.
If you have an excellent or good credit score, you can easily get an unsecured personal loan, but most lenders require people with low credit scores to have collateral to give them secured personal loans instead.
One of the benefits of a secure personal loan is that it may come with low-interest rates. While you may need a personal loan for an emergency, you can get it for any other reason, but it’s important for you to take as much as you can afford to pay back.
2. Credit Card Cash Advance
Essentially, a credit card cash advance means getting the available balance on your credit card as a loan. Credit card companies usually charge higher interest rates for cash advances than they do for normal purchases, and you also be charged a processing fee, but this kind of loan can take care of your emergency.
The thing is, the interest rates will start accruing immediately you take the loan, you consider how much you can afford to take as well.
3. Payday Loans
Payday loans are increasingly popular and just like the name implies, they must be paid within the next payday. Unlike a personal loan that you can typically pay in installments, payday loans are paid back in full amount all at once. One of the best things about these kinds of loans is that you can access one quickly, making them suitable for emergencies,
They are also suitable for people with bad credit and low incomes. On the downside, however, they come with very high annual percentage rates.
Even worse, it’s very easy to find yourself in a vicious cycle with these loans where you use all your payday money to pay the loan, only to take out another to avoid remaining broke. A majority of the people that take payday loans use them for monthly expenses.
4. Pawn Shop Loans
If the top three options don’t sound very appealing to you, you can get a quick loan from a pawn shop. All you need is a valuable item that you can pawn for the amount of money you need for your emergencies. The pawn shop will evaluate your item to determine how much it’s worth, then give you the money and keep the item as collateral.
If you pay the loan amount on time, you can get your valuable item back from the shop. If not, however, the pawnshop will sell it to get the money back. This is one of the best quick loan options because you won’t have lenders breathing down your neck to pay the loan and you won’t have to contend with high-interest rates either.
You don’t even have to fill application forms and the pawnshop won’t ask to see your credit score. All you need is a valuable item that will meet the value of the money you need.
5. Title Loans
Auto title loans are another great option for emergencies and if you own a car you can use the title as leverage for an emergency loan. Of course, the car will be the collateral and the lender may take it from you when you default on your loan payments.
6. Home Equity Line of Credit
If your home has some equity, you can borrow some money using it.
The amount of equity you have will essentially determine the amount of money you can borrow against it. This is a great option for an emergency and the interest rates are always reasonable. Still, you need to understand that you’re placing your home on the line here. You can., however, borrow and pay back as much as you need.
7. Pension Fund Loans
How about borrowing money from your pension fund? This is also possible if you need some emergency funds quickly. The process is fast and you won’t have to give your credit score or pay interest rates. Instead, you’ll lose the interest the money would be gaining.
However, it also comes with the risk of paying the money in about 60 days if you lose or leave your job.
Emergency Loans: How to Get These Kinds of Loans
There are so many ways to get these kinds of loans and these are the top seven ways. You should weigh all your options depending on the amount you need and what you can afford to pay back.
If you’d like to read in-depth information about personal growth, please check out our blog section where we have personal growth resources that will help you in your journey.