Understanding Emergency Loans and How You Can Get One
An emergency fund is an amount of cash you set aside to cover unexpected expenses. Experts suggest having a 3-month emergency fund to meet your needs. However, due to unavoidable circumstances, everyone isn’t fortunate enough to build an emergency fund.
If this is the case, you’ll need to find an option to help you with your unexpected or emergency expenses. Fortunately, there is an emergency loan that comes with various options and is designed to quickly provide you with the funds you need.
Types of Emergency Loans
The following are types of emergency loans you can choose from to help you take care of your emergency expenses:
You can get a personal loan through a bank or a credit union. Multiple lenders can also provide you with cash loans online. So when you try to take out a personal loan, you’re not left with limited options.
Once approved, you’ll receive the loan amount you’ve applied for in a lump sum. You can use this money to pay for your unexpected expenses. It’s vital to remember that you’ll repay your total loan amount in monthly installments, including the fees and interest rates.
A personal loan allows you to pay your loan over an extended period. However, it’s vital to note that repayment terms vary by lender. Thus, it would be best to ask your lender about it.
Besides the benefit of longer repayment terms, a personal loan can provide quick funding. Some lenders can allot the funds a day after your loan application has been approved.
Credit Card Cash Advances
If you own a credit card, it can be an efficient tool that can help you during an emergency. A credit card is an advantage if the merchant accepts payments through cards. However, if the merchant needs cash, you can also opt for a credit card cash advance.
Many credit card companies tend to offer a cash advance feature. This feature allows you to access cash by using an ATM or going to the bank branch. However, it’s critical to remember that the amount you can borrow is limited by a set maximum amount or a certain percentage of your credit card’s limit.
Payday loans are designed to provide you with funds quickly, but they can only grant you a small loan amount. The repayment term of payday loans tends to be extremely short, typically by your next payday or a span of two weeks.
If you want fast access to cash, you might also want to consider getting a title loan. Most lenders don’t run a hard credit check when you apply for this type of loan. However, you’ll need to pledge your car as collateral to qualify.
Since your vehicle will become collateral for your loan, there’s one vital piece of information you should keep in mind. If you can’t repay the loan at the end of the set term, the lender can repossess your vehicle. So it would be best to consider this option only if you’re sure you can pay for it. If not, prepare to lose your car along the way.
How You Can Get an Emergency Loan
First things first, you’ll need to decide what type of emergency loan you want to get. After knowing its different types, you now have a clear understanding of your options. It would also help if you factor in your current financial situation and credit score in your emergency loan decision.
Here’s how you can get an emergency loan:
Gather Your Documents
Most lenders will require you to submit several documents during the loan application process. Since it's mostly the case, it would be best to gather all your pertinent documents in advance. Proof of employment, proof of income, social security number, and identification are some of the papers that might be asked from you.
Comparing lenders is crucial in finding the best type of loan for your needs. In doing so, it’s recommended to consider the funding time, especially for emergency expenses. Moreover, you can also compare quotes by prequalifying from different lenders.
Fill Out an Application
After you have decided on a lender, it’s time for you to fill out an application. With the technology we have right now, most lenders make use of online applications for quick processing. They usually review and decide on your application the same day you applied for the loan.
To Wrap It Up
Emergency loans are designed to save you from being unable to cover your emergency expenses. However, it’s vital to know that most emergency loan options often have short terms. Therefore, if you plan to get one, it would be best to make sure that you pay it back within the set period.
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