Emergencies often strike fast and come from nowhere, making them virtually impossible to foresee. If we could see emergencies coming, most of them wouldn’t be emergencies in the first place! Those emergencies often cost money, especially if something has been broken or otherwise damaged. In those cases, you may need some short-term financial assistance to meet costs as soon as possible. Loan providers have you covered by offering emergency loans, so you don’t need to take out a long-term loan to deal with short-term consequences. Emergency loans for bad credit are also available with some of the leading lenders on the market.
Finding online loans for bad credit can be difficult. This is often the case for emergency loans. After all, if you have poor finances during everyday life, why would you repay your loans after an emergency? That’s the attitude that many lenders have.
Fortunately for you, some lenders will offer emergency loans for bad credit. Here you’ll learn everything about emergency loans for bad credit, including how you can get accepted. By the end of this post, you should understand more about how emergency loans work.
What Are Emergency Loans?
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First, let’s start with what an emergency loan is. Those new to the world of finance may not even know what emergency loans are and how they are used, making things even more confusing during a personal emergency.
There isn’t typically a category of loans you’ll find earmarked as “emergency loans.” Instead, they are just several types of loans that can be accessed quickly to cover unexpected costs. Personal loans can be classified as emergency loans if they get the funds into your account quickly. Personal loans are often the most affordable loan type for the average person, too. Otherwise, credit card cash advances, payday loans, and payday alternative loans can also be delivered fast enough to be considered emergency loans.
Personal loans are a popular funding option that comes in unsecured or secured forms:
Unsecured personal loans don’t require collateral to get accepted. If you make late payments or no payments at all, you don’t lose any other possessions unless you go through bankruptcy. You won’t have to risk your home or your car but unsecured loans are typically difficult to obtain if you have bad credit.
Secured loans do require collateral, so the loan is held against a vehicle, a home, or other physical assets that you own. These are more common for those with bad credit because it’s a way of guaranteeing that the debt gets paid, something that somebody with bad credit usually struggles with. If the debt goes unpaid, you lose the collateral asset to a collections process in place of payment, and your credit score is further damaged.
Lastly, there are credit card cash advances. These are where you get a short-term loan that’s borrowed from your credit card limit. The amount you can withdraw is limited and there are high transaction fees and APRs applied when you take out the advance. These often don’t make cash advances worth it but they can be handy for a short-term emergency payment.
Can You Get Emergency Loans With Bad Credit?
When you have bad credit, your loan options will decrease significantly. Since emergency loans are a broad category of financing options, each type will have different credit requirements and restrictive criteria for acceptance. Having bad credit isn’t the end, however.
You should be prepared to spend more on the loan than those with good credit. You may not be able to borrow as much, too. Since bad credit is indicative of unpaid debt payments in the past, lenders need to be more careful when lending to bad credit borrowers. This means you’ll have to contend with higher APRs and other fees that make the process more expensive.
To find short-term loans that can deposit funds into your accounts at short notice, check out a variety of lenders. Check out the following institutions:
- Online loan providers
- Credit Card Companies
- Credit Unions
- Payday lenders
Shopping around can help you find the most favorable terms for your emergency loan. While you may be in a hurry during an emergency, you shouldn’t settle for the first loans that cross your eye. Some will be much more expensive than others, like cash advances offered by credit card companies, which can also push your credit score further down. Similarly, payday lenders often have ridiculous APRs attached to their loans that aren’t ideal, even in emergencies, therefore getting emergency credit gets tough.
How Fast Can You Get Emergency Loan?
If speed is so important for emergency loans, how fast do they need to be? Everybody faces different emergencies that vary in urgency and costliness, so you should find loans that are fast enough for you and your situation.
Nowadays, acquiring certain loans can be pretty fast. Many lenders have implemented fast funding into their loan offers to compete in the Internet’s loan market, where a speedy and convenient service makes them more attractive to a wide pool of customers. If necessary, many lenders can deposit your funds into your accounts on the same day as your application!
If you have an emergency but can wait for a few days, other loans can take up to a week or more to become fulfilled. This is common with larger institutions like banks and credit unions, which may want to perform other verifications and checks behind the scenes before giving you access to the money.
Do They Impact Credit Scores?
When searching for financial help, it’s natural to be concerned about your credit score and how it may be affected. You have a bad credit score anyway, so the last thing you want is a loan that’ll leave your credit score even more damaged afterward.
Since there are several types of emergency loans, you should ask one question – will it show up on a credit report? After an application to the loan provider, they may report it to relevant credit bureaus. If that happens, the attempt at a loan will show up on a credit report in the future. Paying your loan on time will benefit your credit score while missing payments will have a negative effect on it.
Your credit score won’t be affected if they don’t report to the credit bureaus. While that sounds ideal for those with bad credit, payday lenders are mainly the ones that don’t alert bureaus and they can be very expensive for borrowers.
Personal Loans For Bad Credit (FULL GUIDE)
How To Choose Emergency Loans
So, you should have some idea of what emergency loans are by now, along with some answers to the questions borrowers often ask. Even with that knowledge, you may have trouble choosing the right emergency loans for you and your specific circumstances.
In those cases, it’s time to start asking yourself more questions. Here are a few to start you out:
- Does the lender give loans to borrowers with bad credit?
- Do you qualify for the loan that you want?
- How soon will I get the funds?
- Can I afford loan repayments?
- How long until it’s paid off?
- What do the lenders charge, through the offered APR range?
- Are there other relevant fees?
- There’s another company that provides advice, consulting and lending assistance to the business owners looking for unsecured loans. You can check our Borrowing Club Offer.
Ask other relevant questions that pop up while researching the right loans for you. Borrowers often find the best loan offers by comparing loans and lenders while asking themselves the above questions.
How To Prepare For Future Emergencies
You should try and keep some savings to use in the event of an emergency, so you’re not always soliciting loan providers and further harming your credit score. If you’re finding yourself looking at emergency loans more often than you’d like, you should check out some of our steps below for saving up your own emergency fund. Even if you still need a loan when an emergency strikes, you won’t have to borrow so much if you already have savings.
- Try to get a high-yield savings account that will help your money grow faster than other accounts. It should be separate from your active, commonly-used bank account to disincentivize using it in everyday life.
- Save money every time you get paid, so you don’t spend it on unnecessary purchases. You can automate this process if you don’t trust yourself to transfer money into a savings account every time payments come through.
- Create a budget that takes into account your monthly bills and your spending habits. If you haven’t got experience with this then there is budgeting software that can help, though you only need a pen and paper to work out a budget.
- Stick to that budget by tracking your spending. View it as a challenge, recording every dollar spent and trying to save more and more each month. It can also encourage the building of skills and hobbies that make you more self-sufficient and avoid frivolous purchases even after the emergency savings have been gathered.
- If budgeting proves difficult, take stock of your finances and figure out which expenses can be cut. You can free up more cash by axing unnecessary financial obligations, many of which can be picked up later when your finances are in better shape. You can also try to maximize income by seeking a pay rise or negotiating credit card payments so that you have extra cash to use in day-to-day life.
Improving Bad Credit
For a long-term emergency plan, you should also consider improving your credit score. Then, if an emergency payment arises, you’re in the best situation to get a favorable loan that will help you more and give you better terms for repayment.
To improve a bad credit score, you can do a few things:
- Look over your credit situation by getting a credit report. You’ll need to petition your credit bureau to get a credit report detailing your current financial circumstances. This will show you how you’re doing and what you need to do to improve your credit score.
What points to a lower credit score? Overdue payments, high credit card balances, ownership of very few accounts, and an abundance of credit inquiries in the past that show you’re looking for financing often. Being subject to a collections process or bankruptcy will also harm your credit score.
- Most lenders use the FICO credit score system when assessing applicants. Their formula figures out your credit score mainly by factoring in payment history (35%) and credit usage (30%). For posterity, it also looks at the age of your credit accounts (15%), your credit mix (10%), and any new credit inquiries (10%).
Payment history has the biggest impact, so you should make sure all debt is paid off and upcoming payments are paid in time. Create a filing system to track your upcoming bills and make sure they get paid by alerting you when it’s required. You can even automate bank account payments.
- Credit utilization is how much of your credit limit is in use at any moment. It’s the second most important FICO factor and should be kept at or below 30% no matter what. This is a well-managed limit that can be further stripped back until you’re only using 10%, which is ideal for improving your credit score. Many credit cards alert you when it’s reaching a high balance, making it easier to know when you need to lower your utilization.
- When a lender inquires into your credit history, they will perform one of two search types. These are hard inquiries and soft inquiries. Soft inquiries are where you or your employer checks your credit for whatever reason, or a credit card company checks your credit history for pre-approved offers. These don’t affect your credit score.
Hard inquiries, on the other hand, do affect your credit score. They have a time limit, anywhere from two years to two months, and are used when taking out a new credit card, an auto loan, or a mortgage. These need to happen but they shouldn’t happen too often. If they do, they’ll have a negative effect on your score.
- Improving your credit is a long process, so you should make sure you’re on track throughout the whole journey. You can do this with a credit monitoring service that follows your credit score across a span of time. Most of these are free or you can track it yourself by checking in with your credit bureau on a semi-regular basis. This will help you in getting emergency credit when you need it the most.
They’re also generally good for keeping track of your credit circumstances and even combatting crimes like identity theft. If a fraudster tries to open a new account that’s attached to your credit, you’ll be one of the first to know with a monitoring service. Then you can contact the relevant authorities to freeze your finances and have the situation handled before any damage can be done.
Credit Ninja is a fast growing Finance company that offers 16 different types of Emergency Loans for Bad Credit. The company is based in Chicago, IL, USA.
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