If something unexpected happens and you don’t have enough savings to cover your expenses, you may need to borrow money. However, if you are less than perfect credit, you usually need to look beyond traditional personal loans to get the help you need.
Loans for poor credit are available, but they cost a higher interest rate and fee than other loans. Before applying, weigh the advantages and disadvantages of each option to avoid financial headaches.
Types of emergency loans for poor credit
Emergency loan types for bad credits usually come with higher than average interest rates and lower funding restrictions. These options are designed for borrowers who need quick funding due to unexpected invoices or costs. With a few exceptions, short repayment terms are also very common.
Payday alternative loan
Payday replacement loans offered by Select Federal Credit Unions offer up to $2,000. These unsecured loans have repayment terms ranging from 1 to 12 months. They may get it easier than traditional personal loans, but borrowers may still need to pass on credit checks for approval.
The interest rate tends to be based on your credit score, so poor credit people tend to get the highest interest rate. That said, these loans limit interest to 28%, which is lower than some credit cards and most other emergency loans. To apply, you must be a member of the credit union that provides this loan product.
Credit Card Cash Advance
Some credit cards offer cash advances that allow you to withdraw funds from your credit line. Visit your ATM or bank branch and withdraw the required money to limit cash advances or credit card available, depending on the card issuer’s guidelines.
To use this feature, you may be charged a transaction fee of 3-5%, which is usually 3%. Furthermore, because there is no period of bounty, you will soon begin to acquire profits from the funds you borrow. Credit card cash advances tend to be limited to 20-30% of the available credit limit.
Payday loan
Payday loans are short-term, unsecured loans and provide quick funding. Most are limited to $500 and will be paid until the next payday or within two weeks. You don’t need to get a credit check to get approved.
That said, payday loans are not legal in all states. Also, they allow them to have their own laws. You will face a fee between $10 and $15 for every $100 borrowed. This corresponds to a three-digit APR.
In many cases, there is no funds available when the loan deadlines cause it. If you live in a state that allows rollovers, you may be able to get an extension on due date, but this is usually offered at a price that allows you to remain trapped in a payday loan debt cycle.
Title Loan
Title loans are protected by the title of the vehicle, which acts as collateral in exchange for a short-term loan. In most cases, you need to own your car entirely – you will not lend it to it – limited to loans of 25% to 50% of the value of your car.
Like payday loans, title loans should only be used as a last resort for a number of reasons. If you can’t keep up with your payment, you risk losing your car. Even if you can keep up with your payments, the title loan also has high interest rates and a short repayment period that can put a lot of strain on your budget.
How to choose which emergency loan is best
A proper loan will depend on your financial situation. Start by understanding the details of each option and weighing the advantages and disadvantages along with borrowing costs to find the best fit.
If you are a member of a credit union, it is worth applying for a payday replacement loan if offered. Otherwise, it will work if credit card cash advances are available, as they do not need to be officially applied and the interest costs may be lower.
However, if none of these are options, consider payday loans. The borrowing costs are sudden, but paying off the loan means quickly avoiding any additional charges.
If you don’t qualify and desperately need cash, try a title loan. If a loan agreement defaults occur, make sure you can afford to pay to prevent the vehicle from being seized.
Emergency loan options
If you don’t want to use credit to cover unexpected invoices or emergency costs, these alternatives to emergency loans may work instead.
- Get help from charities and local nonprofits: Call 211 to find out more about the financial resources available locally or through the state.
- Request a salary advance: If you’ve been working for a while, ask your employer to advance your next salary.
- Ask a friend or relative for a loan. They may be willing to offer you an interest-free loan, but make sure you place the agreement in writing.
- Arrange payments: If you need fast cash to cover your monthly obligations, contact your lender or creditor for an extension.
- Borrow from 401(k): The plan of around 401(k) allows loans that are either lower, up to $50,000 or 50% vested interest reductions. Please note that this route can affect your retirement savings as there is a large tax deduction when borrowing from a 401(k).
Conclusion
You can get an emergency loan with poor credit, but you must first resort to alternatives. Local hardship programs, family and friends, or advances in pay can help you meet emergency costs without paying interest.
If you need to rent, carefully compare the options. Find a lender who will provide a fair fee with monthly payments. Emergency loans for bad credits can be useful in a pinch, but you need to take careful consideration to protect your credit and financial well-being.
