Why personal loans are good for emergencies
Do you have the funds to cover an unforeseen financial emergency? A recent Bankrate survey found that only 39% of Americans can afford a surprise $1,000 bill. If you can figure it out, it can be tempting to resort to high-interest credit cards or borrow funds from friends or relatives. But a personal loan might be a better option.
You can get the money you need quickly, and most lenders simplify the application process by letting you apply online and receive a quick decision. Plus, many personal loans come with flexible terms and monthly payments that won’t strain your budget too much.
Why are personal loans good for emergencies?
Personal loans are great for emergency expenses because of their flexibility. Whether your basement floods or you lose your job and need money to cover your bills, an emergency loan can save your life. They are much more affordable than payday loans and credit cards which often have exorbitant interest rates and exorbitant fees. They also have other advantages.
When you have an unexpected expense, you may need to pay it immediately. If your car’s engine breaks down, for example, you’ll want to fix it as soon as possible since you depend on your car to get around.
Depending on the lender, you can apply for a personal loan online quickly from the comfort of your own home and receive a quick, even instant decision. After approval, you may be able to get the money the same day, within 24 hours or within a few days.
Low interest rates
When you compare personal loans for emergencies to other options, you’ll find that they come with low interest rates. The higher your credit score, the lower the interest rate you can get. A low interest rate can save you thousands of dollars on the overall cost of your loan.
If you don’t have the best credit but need an emergency personal loan, don’t worry. Many online lenders have more lenient requirements than other financial institutions and may also consider factors such as your income and work history when deciding whether or not to approve you for a loan and at what rate.
Personal loans also come with flexible repayment terms. Most lenders offer loan terms between one and five years, which is advantageous for several reasons.
You’ll likely get an affordable monthly payment that fits your budget, especially if you get a competitive interest rate. And you will not pay a fortune in interest as you would with a credit card since it is already taken into account in the monthly payment when you take out a personal loan.
Where can I get emergency loans?
Emergency loans are offered by credit unions, banks and online lenders. Here’s what you need to know about each option to decide which is best:
- Credit unions: Credit unions can lend you money even if your credit is fair or poor. The caveat is that you must be a member of a credit union to benefit from its products and services.
- Banks: If you apply for an emergency loan from a traditional bank, you will likely need to meet higher creditworthiness or income criteria. Also, you may not get the funds as quickly as you need them.
- Online lenders: Online lenders can process your application completely online and get you the money you need fast. Most also let you prequalify so you can find out what loan rates and terms you might qualify for before you apply. This can help you avoid a rigorous credit check that could put a strain on your credit.
What can I use emergency loans for?
The most common uses of emergency loans include:
- Medical bills: If you or someone close to you needs to go to the emergency room, for example, and your insurance policy doesn’t cover the entire trip, an emergency loan can cover out-of-pocket expenses. Depending on your insurance policy, the health costs payable by you may vary from 10% to 100% the cost of your service. They can quickly add up to thousands or tens of thousands of dollars or more.
- Car repairs: No matter what type of car you drive or how new it is, it may need repair at some point. An emergency loan can pay for a simple repair like new brakes or a more complex repair like a new transmission. According to AAA, regular repair costs are usually between $500 and $600 or more.
- Home repairs: A leaky faucet, leaking toilet, broken furnace, and cracked siding are all examples of problems you might face as a homeowner. Luckily, an emergency loan can help keep your home in peak condition when the systems go down. The cost of home repairs varies greatly, but HomeAdvisor estimates that it ranges from $3,954 to $20,260.
- Current invoices: If you lose your job, lose your hours, or are unable to work for any reason, you may need to take out an emergency loan to pay your mortgage or rent, utilities, groceries, and other bills. While monthly bills depend on a number of factors, including your family size and location, the average American family spends $1,889 per month on their household bills.
The bottom line
In a perfect world, we would have the power to plan all of our life’s expenses. Since unexpected expenses are inevitable, personal loans can be very helpful. A personal loan can allow you to cover unexpected expenses without hassle.