Emergency loans can help you out when you suddenly face the unexpected. If you don’t have an emergency fund yet or you don’t want to drain whatever savings you have, an emergency funds loan can be a good alternative.
Loans for emergencies can go by different names, operate in very different ways, and come from various sources. Most give you quick access to cash, but that’s not the only thing you should consider. You’ll also want to most economic option that suits your specific situation.
Let’s take a look at your options, the pros and cons, and who can potentially use each one. If you understand your borrowing choices, you can avoid making a bad choice and access money quickly when you need to handle an emergency.
Home Equity Line of Credit (HELOC)
If you’re facing a large expense, a home equity line of credit may be your best solution. As the name suggests, it is a line of credit that a lender makes available to you based on a percentage of the equity in your home. That’s the difference between appraised value and the amount remaining on your mortgage.
A HELOC offers a fixed interest rate and a long repayment term (sometimes up to 30 years). You can spend as much as you want of your available credit during the draw period which is typically 5-10 years. You only pay interest payments during this time. When the draw period ends, principal and interest payments begin.
However, the process is far from simple and it could take up to six weeks to get your money. While this may not be fast enough in some cases, it is often the best way to secure a large amount of money quickly.
Pros
- Low interest rates compared to many other borrowing options
- Longer repayment terms than most other options
- Potential for tax deduction if money used for emergency home repairs
Cons
- Must own home and have ample equity to qualify
- Lengthy process and slow funds release
- Secured borrowing with the potential of foreclosure if you fail to pay off your line of credit
- May involve additional costs
Potential Users
Homeowners with a good amount of equity that don’t need funds straightaway. A HELOC is often a good solution for large home or medical bills since it provides a long repayment term.
Title Loans
A title loan is another emergency loan, but it relies on the equity in your vehicle. The lender offers you between 25 and 50 percent of the current market value of your vehicle, providing you own it free and clear.
However, these loans have very short repayment terms. In most cases, you must repay your loan between 15 and 30 days in a single payment. That payment includes the full amount, plus fees. However, some lenders do offer installment plans and you may be able to qualify without affecting your credit.
Nonetheless, title loans are secured loans with your vehicle used as collateral. If you don’t repay your loan, the lender can seize your vehicle.
Pros
- Fast access to funds
- Easy approval, regardless of credit
Cons
- Must own vehicle free and clear
- Very high interest rates and fees
- Vehicle is used as collateral and you may lose it if you don’t repay your loan
Potential Users
Title loans are an option for those that own a free and clear vehicle and they have poor or no credit. They may also provide a higher cash limit than payday loans.
Paycheck Advances
If you receive a steady paycheck, you may be able to ask for an advance. Not all employers do this and even if yours does, there are likely limits on how much you can borrow.
There are also many cash advance apps that provide upfront money that you repay on your next paycheck. You will pay a fee for each advance and there may also be a subscription or maintenance fee for using the app.
Pros
- Fast way to get funds
- Relatively simple process
- If you get an employer paycheck advance, it will probably be fee and interest-free
- If you use a cash advance app, your employer won’t know your business
Cons
- Limited amount of cash available
- Amount borrowed deducted from next paycheck which can leave you strapped
- Cash advance apps charge a fee of between 3% and 5% of your cash advance amount
Potential Users
Anyone who receives a regular paycheck and only needs a small amount of money to manage an urgent need.
Cash Advance on Your Credit Card
Credit cards are convenient and often the first place people look for emergency loans. You don’t need to apply for credit and you can just go to any ATM or bank branch and pull out money quickly. However, there are some definite negatives to using this emergency cash loan option.
Typically, a cash advance on your credit card has a higher interest rate than normal, ranging between 22.99% to 27.99%. Plus, an advance doesn’t have a grace period like your credit card charges. In other words, you start paying interest immediately.
Additionally, a credit card cash advance usually involve additional fees. The most common is 5% of whatever you borrow, or a minimum of $10. However, some creditors charge more. No matter what, it is an expensive choice.
Pros
- Fast, easily available funds
- Conveniently available on most credit cards
- No additional credit check required
Cons
- High interest rates
- High fees
- Can only borrow up to card limit
- Compound interest accumulates immediately
Potential Users
Of course, you can only borrow against a credit card if you have one. If you need quick access to cash and are willing to pay the incredibly high interest rates and fees, you can do so up to your available credit amount.
Payday Loans
Payday loans offer up to a set amount, providing you have the means to repay it quickly. The maximum amount varies between state, but it’s usually no more than $1,000. Some states prohibit payday loans.
This is not considered one of the best emergency loans for several reasons. First, the interest rates are some of the highest in the United States. Second, these loans usually involve expensive fees. Finally, you must repay your loan within two weeks or by your next pay period.
As a result, many people find it very hard to repay their loan on time. That can lead to a cycle of debt that is very hard to escape.
Pros
- Easy approval, often without credit check
- Fast cash
- May qualify through various income sources
Cons
- Very high interest rates and fees
- Short repayment term
- May require automatic repayment through bank withdrawal
Potential Users
Generally, people use payday loans when they can’t qualify for other emergency loans. Alternatively, people use this option since it is readily available and fast.
Personal Loans
An emergency personal loan is a particular loan type that can provide quick cash when you need it. You may want to find out more about different types of loans before you choose, but a personal installment loan is often your best option.
In short, a personal loan provides a cash advance that you repay in fixed payments over a set period. Typically, repayment lengths ranges between 6 month and 5 years. The borrower can choose the term length, which adjusts their payment amount up and down.
Today, personal loans are available for almost any individual. They’re offered as in-person loans with a longer process and fast cash loans online too. Many online lenders have money in your bank account within one day of going through a simple application process. Some eliminate the need to upload income documents too, by verifying your income electronically.
Lenders often target particular borrowers too, which may increase your chances of approval. For instance, some lenders cater to those with no or little credit. Others grant loans based on income.
Pros
- Fast and easy process
- Broad range of loans available
- Most loans do not require collateral
- Flexible terms
- Fixed interest rate and repayment schedule
- Can be used for almost any use, including quick emergency loans and loans for medical procedures
- May offer lower interest rates than many other types of emergency loan financing
Cons
- Need to find the right lender
- Some lenders charge an origination fee based on a percentage of your loan amount
- Some lenders charge prepayment penalties if you want to pay more than your scheduled payments
Potential Users
Almost anyone can obtain emergency loans online. They are not limited to those with good credit and offer the benefit of a fixed repayment schedule and set interest rate.
Get Your Emergency Loan Through FlexMoney’s Lender Network
FlexMoney connects you to an extensive network of lenders. We provide a easy, safe way to find the best possible emergency installment loans in a flash.
Complete one application form and we’ll immediately show you what’s available to you. Compare interest rates and terms and find the best emergency loans in minutes. We even offer low income loans if you’re struggling to qualify elsewhere.
Funds release happens quickly once you’re approved. Complete your application form today and tap into the best alternative lending platform in the U.S. You may be able to borrow between $200 and $35,000, depending on your situation.