If you have little savings and urgently need cash to cover some expenses, an emergency loan will come in handy. You may need a quick loan- a small flexible credit to cover issues such as sickness. Your credit card and the required amount will give you several options, such as payday loans, pawn shop loans, and unsecured personal loans.
You will have access to these loans in your bank account within a day or two, depending on the lender. Although many loans that are easily accessible come with higher interest rates, you can thoroughly do your research before going for one. Click here to know more about.
Let’s look at what loan options you have in case of an emergency.
1. Payday Loans
It is a quick short-term loan that is due on your next payday. With this type of loan, you pay everything you owe plus interest once, unlike a personal loan which you pay in installments over a particular time.
The downside of this kind of emergency loan is that it can have high APRs that could even go up to 400%, according to data from the Consumer Financial Protection Bureau. If you’re not careful, you can end up in a debt trap. That means you’re unable to pay off the loan and instead continue borrowing more often to offset debts. This should therefore be your last resort to avoid unnecessary continuous debts.
2. Personal Loans
If you have good credit, you can easily qualify for an unsecured personal loan. It is one of the best loans for emergency purposes as you’re given a certain amount of money at a fixed interest rate and installment payment period. You can pay it back over several months or years.
You can get a small or significant amount of money for this loan, depending on your needs. Just remember to apply for what you only need and can afford. Try and borrow as little as you can.
3. Pawn Shop Loans
In this kind of financing, you will use a valuable item to secure a loan. This item acts as collateral to the loan. So, after application, the pawn shop will look at the value of your item and keep it after giving you the loan.
If by any chance you fail to pay back the loan, your item is sold to recover the money. It could be a good option if you have a poor credit report since the pawnshop doesn’t check your credit history.
4. Credit Card Cash Advance
Cash advance means using your available credit card balance to secure a loan. In such transactions, the credit card company usually charges higher interest rates than in standard purchases, and you will also be charged a processing fee. Immediately you take out the money, interest starts accumulating, so be keen on the cash amount you request.
5. Title Loans
If you have a car, you can use its title as collateral for a short-term loan. It is such a luring option since a credit check is not done. However, you may lose your car ownership if you’re unable to pay the loan. Proceed to this option with lots of caution.
Before you decide to take up an emergency loan, you can consider several simple options to fix your needs.
● Low-Interest Credit Card
You can get a low-interest credit card of up to 0% APR on purchases within a certain period of time. You have the option of using this credit card as a quick short-term loan and pay it back within the intro APR period to avoid colossal interest. Although when applying for one, a hard search will be done, which could lower your credit score.
● Home Equity Line of Credit
If you own a home, you can use it as collateral for an emergency loan. You need to consult with the lender on the available repayment terms. Some lenders will want you to pay it after the draw period, while others can give you a specific time to repay it.
● Medical Bill Repayment
If you have exorbitantly high or unexpected hospital bills, you can discuss the available payment plans and options with the healthcare provider. Some hospitals offer financial help options for low-income and under-insured families. Get in touch with your hospital to see what programs they have in place for such people.
It is absolutely normal to need emergency funding at some point in life. But you can begin saving small amounts of money that would cover emergencies if they arise. You can consistently keep the savings in a high-yield account.