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How To Find The Emergency Loans To Suit You.
Life is unexpected and it’s beautiful like that. Sometimes it’s a positive experience, and sometimes everything that can go wrong – goes wrong. Whenever life gives us an unpleasant surprise and it requires a little bit of extra financial help, it’s reasonable to take a look at emergency loans. A medical or dental problem is one of the most common problems that people take out an emergency loan, because having dental or health issues can never be ignored. Some other things that people take out emergency loans for are home or car repairs, in any case – both are necessities in life.
In an ideal world, everyone should have an emergency fund ready for those kind of situations – but some don’t have the luxury of setting funds or having extra funds for that. And that’s why is important to know some information about ways to get money during those time of crisis. In this article, we’ll be discussing about emergency loans that you can use to access much needed funding during your time of crisis.
What are emergency loans?
Unlike a car loan, student loan, or mortgage, an emergency loan can be used in various ways, just like a personal loan.
An emergency loan has many forms such as a payday loan, pawnshop loan, credit card loan, cash advance loan, and a personal loan. When taking out an emergency loan, the funds you borrow will be directly wired into your bank account after a day or two upon approval. It is important to do your research and weigh your options before committing to a specific type of emergency loan and lender. Be sure to double check and read any documentation that is given to you thoroughly.
While an emergency loan can be life-saving, it can also be a problem if not managed right. A statistic from the federal reserve shows that a whopping 40% of the American population can’t even cover a $400 emergency. Now, an emergency loan will have high interest rates, depending on the type and terms of your loan. So if the average American citizen already has trouble with covering a $400 bill, how much more if it’s paired with astronomical interest rates. Proper planning and research is imperative in making sure that you don’t bury yourself in debt.
Types of Emergency Loans.
There are several ways of getting cash when it’s needed the most, bear in mind that different types of loans will have different requirements and limitations. These are the emergency loans that are available to you:
Car Title Loan
Anyone who owns a car with a clear title or is almost paid off can usually get a car title loan. This type of loan is popular amongst people who want to earn a quick cash. This type of loan is considered to be a secured loan as you are using your car as collateral. Therefore, if you fail to pay your monthly dues, your car might get repossessed.
Having a good credit isn’t needed for a car title loan, because as explained above – it’s a secured loan. The amount you’ll get from the loan will depend on the appraised value of your vehicle. Some lenders still allow the borrowers to drive the car for practicality’s sake. You can receive your funds in as little as 24 to 48 hours, thus making it popular choice for people who’re looking for financial aid.
Credit Card Cash Advance
Most credit cards can be used for a cash advance. If you’re looking for emergency funds, getting a cash advance from your credit card might be a viable option, as you can immediately get said funds. The only requirement when cashing in advance is for you to have credit left on the card.
Be aware though that credit card companies will charge you a higher interest rate with cash advances compared to your normal purchases, and a processing fee.
The moment you take out the money from your credit card, the interest will start accruing, so it’s best to pay it off immediately once you’ve settled with your emergency to avoid piling up.
A payday loan is another type of short-term loan which typically needs to be repaid within a month or on your next payday. Compared to other traditional loans, you repay it by installment – but with a payday loan, you repay it back all at once. And that’s just one of the dangers of a payday loan, on top that – you also get slapped with large fees and sky high interest rates of up to 400% APR.
A payday loan is notoriously known to trap people in debt because of the things said above, and many have been stuck in a cycle where they take out loans to pay off loans. And thus, it’s advised that you only take a payday loan as a last resort.
Pawn Shop Loans
With pawnshop loans, you will need an item of value to even avail for the loan. That item’s value is then assessed by the pawn shop and is then kept by them as a collateral for your loan.
This is one of the quickest ways to get cash during times of emergency because it doesn’t require credit checks or extensive review of your application. But in the event that you fail to pay your loan back, the pawnshop will repossess and sell your item.
If you have an excellent credit score, one way of getting emergency funds is through a personal loan. A personal loan is an unsecured type of loan in which you aren’t offering anything as collateral other than your promise of paying back. This kind of loan is risky for lenders, therefore needing an excellent credit score for you to get the best terms.
A personal loan is paid by installment method in which you have a fixed interest rate. Usually having better rates than a credit card, and has little to no restrictions on where you can use it for. Just make sure to borrow within your means.
Alternatives to emergency loans
Rushing to get a loan will always result negatively. Before rushing into things, consider your different options and see where you can get the most favorable terms and rates for you.
Low-interest credit cards
Having a good credit score would qualify you for a low-interest credit card which has a 0% initial APR on your purchases for a limited amount of time. You can then use said credit card to cash out and use it as a short-term loan before your trial or promotional period ends.
One thing to note when applying for a credit card is that it’ll be reflected on your credit report and potentially affect your credit score. Take out only what you need and nothing more during the trial period because once it ends, any remaining balance that you have on your card will accrue interest.
Medical Bill repayment plans
If your emergency situation involves medical bills, then you can talk to the hospital about potential repayment methods that wouldn’t hurt you. Most cases, the hospital will help you come up with a payment plan.
And in rare cases, if you are a low-income family – hospitals may provide you with financial assistance options. Financial assistance options may vary from hospital to hospital, so it’s better to communicate with them and see if you can qualify for said option.
Home Equity Line of Credit
If you’re a home owner, you can consider taking out a loan against your home equity line of credit. This uses your home as a collateral, thus securing the loan. But before doing so, you need to know what you’re getting yourself into, the ins and outs of the loan, how it’s paid and how much the interest would be – because you are running the risk of your home getting repossessed.
Prepare yourself for your next emergency
If you are ever in need of a loan, you’re not the only one. As stated earlier, 40% of the American population can’t shoulder a $400 in emergency expenses. It’s not just the low income families that are dealing with this kind of situation. 1 out of 10 in the working class are living paycheck to paycheck despite earning over a $100,000 a year.
It may prove difficult to break the cycle of living from paycheck to paycheck, but you can start by doing the small things and setting aside small amounts that are meant for emergencies when you receive your paycheck.
Setting aside $10 per paycheck can go a long way towards your emergency funds. It’s best to directly put your funds on a savings account, and only spend them to necessary things.
One extra step that you can do is to put your savings on another high-yield savings account, that way it’s easier for you to not touch those funds until it’s necessary.
No one wants to be in a situation where you need to take out a loan – but it happens and there’s only so much you can do but to arm yourself with the knowledge of what to do and where to go. It’s best to know the risk involved and the cost of what you’re getting into.
Read every fine print that is given to you and review all your other options before committing to a loan. Doing so will give you the peace of mind that you’ve made the right choice.
If at any point you feel you need advise you can talk to stepchange