What is the best way to deal with emergencies? It depends on what kind of situation you have. If the emergency requires your physical help, you’ll be more than willing to assist in any way. But what if the situation requires money and you have inadequate savings in your account?
Where will get the fast money? One way is to apply for emergency loans. What types of loans are emergency loans and how can you get them?
Emergency Loans – What are they?
In simple terms, emergency loans are the types of loans meant to cover unexpected expenses. These expenses cannot wait for days until you get your next salary. They need to be attended to at that particular time.
Common Types of Emergency Loans
These are short-term-based loans with very fast approval times. If you are in a situation of I need 2000 dollars now, then this is an immediate option for you. They are sometimes referred to as emergency same-day loans. They are unsecured and do not require credit checks hence the name emergency loans no credit check.
They are mostly obtained from online lenders but you can also get them from physical loan institutions. Be aware of their high interests with APR ranging from 200% to over 400%. Make sure you have a good plan of repaying it in time.
Personal loans are installment loans that are mostly unsecured but you can as well secure them if you need much lower interest. They have an interest rate ranging between 6% and 36% depending on factors like your credit score, loan repayment period, whether you’ve secured the loan or not, and the lender.
You can access personal loans from banks, online lenders, and credit unions.
Payday Alternative Loans
If you are a member of a certain credit union, you are eligible to get a payday alternative loan. These are loans given by credit unions to their members to serve as an alternative to payday loans. Their interests are rated at a maximum of 28%. This value is capped by the National Credit Union Administration.
The interest is lower than the normal payday loans hence it’s a good option. Also, the payday alternative can be paid in installments for about six months. Their loan amount ranges between $200 and $1000. One thing to note is that you cannot receive more than three payday alternatives in six months.
How Do They Work?
Emergency loans can be applied from online lenders, physical banks, or credit unions. They are mostly unsecured but there are some which can be secured with collateral.
If you decide to apply from online lenders, you can go to their official website or use a mobile loan app to register. You’ll then fill out an application form while submitting the required documents. For the physical banks and credit unions, the teller will help with the loan application.
The emergency loan has different approval times and disbursement of funds. Some can go as long as seven days for the approval process to take place. Hence, it’s a good practice to look for loans with fast approval that will help your situation.
Things to look out for when applying for emergency loans
1. Fast Approval Time
Emergency loans are meant to cater to immediate situations hence it’s important to find a loan that has a very fast approval time. Loans that can be disbursed the same day or after one day is recommended.
2. Minimal Paperwork
During an emergency do you have time to look for the numerous documents required by some emergency loans? The emergencies have already given you enough stress and hence what you need is easy loan approval with minimal paperwork. You’ll need to look for loans that have this type of feature.
3. Credit Score
Some loans will check your credit score while others will not. If you have a good credit score, it can be wise to take the loans that check your credit score since they have a lower interest rate than the no-credit-check loans.
If, however you have a bad credit score, it can be better to go for the no-credit-check loans. Their interest will however be higher. You can still find emergency loans with bad credit that have a relatively lower interest rate.
4. Loan Limits
Different types of emergency loans have different loan limits These emergency loans, however, don’t have a higher amount since they are frequently short-term based. Their loan amounts mostly range between $200 and $1000.
The loan limits will depend on your consistency in applying for the loans from the same borrower and your repayment abilities. The more you borrow a loan from the same lender and repay it in time, the higher your loan limit will be.
5. Interest Rates
Since most emergency loans tend to be unsecured, their interests tend to be higher than secured loans. This is because the risk of default is pretty high. Remember, just because the loans are unsecured doesn’t mean you can get away with it. Every lender has a legal way of making sure that the loans are paid.
It’s a good practice to always do your research to find lenders with lower interests despite providing unsecured loans.
6. Repayment Period
The repayment period will depend on how urgent you’ll get the cash to repay the loan. If you think you can get the whole amount by the end of the month, it can be a good idea to get a one-month loan. However, if you think that the amount, you’ll get will be lower than the whole amount, you can decide to get an installment emergency loan.
The total amount paid in installment emergency loans will be higher than the one-month loan. This will of course be true if the one-month loan does not have extraneously high interests.
We cannot escape from the emergency events. What’s vital is how we manage them. Getting an emergency loan is one of the ways of effectively dealing with those events.
Also Read: How Technology Is Helping With Payday Loans?