Types of emergency loans
Here are the most common loan options you can apply for in case of emergencies.
Unsecured personal loan
An unsecured loan is for someone with verifiable income who meets the lender's minimum credit score and debt-to-income requirements. The loan term varies.
Secured personal loan
A secured loan is for a borrower who has a valuable asset that they can borrow against. This could be a brokerage account or a certificate of deposit (CD) account.
Normally this loan application requires proof of income, because even with assets, you need to show that you can afford the monthly payment. The loan term varies.
Payday loan
If you have verifiable income and recent pay stubs, a payday loan is available on a walk-in basis with no credit check.
A payday loan is a short-term loan with very high fees and is known as a predatory loan. Predatory means the loan is unfair, abusive, or deceptive. One way a loan can be "abusive" is by being outrageously expensive, and payday loans usually fit that category. Many payday loan borrowers become trapped in a cycle of debt that is difficult to break. The average payday loan borrower renews their loan eight times. The loan term is usually between one and four weeks.
LEARN MORE: What Is a Payday Loan?
Payday alternative loan (PAL)
If you have a job and are a member of a participating credit union, you might be eligible for a payday alternative loan (PAL).
Not all credit unions offer it, but those that do cap interest at 28%, which is a fraction of the cost of a storefront payday loan. The loan term is usually a few weeks or less, but some PALs have a 12-month repayment term.
Title loan
A title loan is for someone with a car, truck, motorcycle, RV, or boat that they are willing to offer as collateral against the loan.
Like predatory loans, this loan option typically has very high fees and a short loan repayment period. If you don't repay the loan, you give up your right to the vehicle. The loan term is often one month or less.
Credit card cash advance
If you have a credit card and it isn't maxed out, you may be able to take a cash advance against it.
Many credit cards allow you to borrow money. The cash advance limit is often lower than the credit limit for purchases. You might pay a fee to get the cash advance, and there is no interest-free grace period. You'll owe interest starting the day you take out the cash.
The interest rate for cash advances is often higher than the interest rate for purchases, but it's lower than the rate for most payday or title loans. The loan term is whatever amount of time it takes you to pay off the balance.
Small Business Administration (SBA) disaster loan
Small Business Administration (SBA) disaster loans are for homeowners and renters in addition to business owners.
The Small Business Administration provides personal loans and business loans to people who need help recovering from declared disasters, including civil unrest and significant acts of nature. The loan term is typically several years or longer.
Specialty loan (such as dental or veterinary)
Healthcare and veterinary care loans are for people who have expenses related to things like dental or pet care emergencies.
Your provider may even give you a brochure with information. Typically, these are deferred-interest loans. That means if you pay off the balance on schedule, you could pay little to no interest. But if you don't, you'll owe interest on the entire amount (even the portion you've already paid off).
This loan might also be available for medical care expenses, including elective procedures. The loan term is usually six months to three years.
SBA Economic Injury Disaster Loan (EIDL)
Business owners can apply for economic injury disaster loans (EIDL). The Small Business Administration's EIDL is for small businesses, small agricultural cooperatives, and nonprofits experiencing a temporary loss of revenue. The loan term is typically several years or longer.
Private emergency business loan
Business owners can apply for emergency business loans from private lenders.
Many online and brick-and-mortar lenders offer emergency business loans. This type of loan may be based on pending customer invoices, on future sales forecasts, or on the business owner's credit rating. The loan term varies.
Choosing the right type for you
Not sure which type to choose? The below table shows typical requirements and costs for each loan type.
