Best Financing Options For Unexpected Expenses

Most people don’t have an emergency fund to secure their future. This usually leaves them financially vulnerable when unexpected expenses come along their way. If you’re in this shoe, you should know you’re not alone. 

Lucky for you, there are many funding options you can choose from. These options are called emergency loans, designed to help you get the funds you need faster than traditional loans. 

What Is An Emergency Loan?

Emergency loans can help cover your unexpected expenses. They can be a quick source of funding. In addition, they are usually unsecured, so the lender won’t require you to pledge collateral.

Emergency loans are usually short-term. Several of these options tend to have a term of one week or two. In addition, they are usually offered to borrowers with poor credit scores.

It’s always a brilliant idea to set aside emergency money when you have the chance. However, if you’re currently in a financially challenging situation, there’s nothing much you can do about it. Below are a few scenarios where you might need to take out an emergency loan:

  • There’s an issue with your paycheck, and you can’t get paid on the period you expected;
  • You need to pay your utilities (such as water, electric, and gas bill) or else they might get shut off;
  • Your car unexpectedly broke down, and if you don’t fix it, you might not get to do your errands or go to work. 

Types of Emergency Loans

Emergency loans usually come in different types. They include the following:

Personal Loans

Generally, personal loans are unsecured. You don’t have to pledge any collateral to get approved. However, lenders will evaluate your creditworthiness to determine the risk of lending you money.

Personal loans can grant you a fixed loan amount. This will then be repaid in fixed monthly installments over the life of the loan. Unlike other emergency loan types, a personal loan usually has a term of a few months to several years.

Credit Card Cash Advances

You usually use a credit card to pay merchants directly. This is quite useful if the store or place accepts credit cards. However, it can’t help you if you require actual cash.

If this is the case, you can opt to get a credit card cash advance. However, it’s recommended to ask first before you get one. This is because most credit card companies tend to charge fees for cash advances.

Payday Loans

You can use a payday loan for unexpected expenses. However, they are designed to have a short term (usually until your next payday or in one to two weeks). Also, not all states allow payday loans. So, it’s best to do your research.

Title Loans

A payday loan and a title loan are pretty similar. However, a car title loan will require you to pledge collateral (title of your car or any other vehicle). Also, a title loan usually has lower fees and interest rates since the loan is guaranteed or secured.

In any secured loan, there’s a risk of losing your collateral if you fail to pay. So, it’s recommended to make your payments up to date. 

Is It Possible To Get An Emergency Loan With Bad Credit?

The answer is a big yes. As mentioned earlier, lenders tend to offer emergency loans to those with bad credit. This is because most emergency loan types don’t require a credit check. So, having bad credit won’t matter during the loan application process.

Unfortunately, if you’re hoping to take out a personal, it’s crucial to keep in mind that your option might be limited. However, several lenders also offer personal loans to borrowers with bad credit. It’d be best to look for this type of lender since they can take better care of your needs than those who don’t specialize in bad credit loans. 

Other Ways You Can Get Money Quick

Besides getting an emergency loan, there are also other alternatives you might want to consider. They are the following:

  • Zero-percent APR credit card. If you have a good credit score, you might be qualified to get a credit card that provides an introductory 0% annual percentage rate (APR). This can help you cover your expenses and repay them with 0 interest.
  • Home equity line of credit (HELOC). This option can provide you with the money you need. Plus, it usually has a low interest rate since your home’s equity secures it. However, it’d help if you had an existing HELOC so could enjoy the benefit of getting funds quickly.

To Wrap It Up

Not everyone has the opportunity and resources to put up an emergency fund. That’s why it’d be very challenging to get by when unexpected expenses come along. Fortunately, multiple types of emergency loans can help cover these expenses and take you out of your misery.

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