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An emergency loan can provide much-needed cash in a difficult financial situation. But if you have bad credit, you may be wondering if you can qualify for such a loan.
The bottom line is yes, you can get an emergency loan with bad credit—but your options may be limited. With less-than-ideal credit scores, you can generally expect to pay relatively high interest rates, so it's important to shop around to try to limit your costs.
What Is an Emergency Loan?
An emergency loan is usually a short-term loan used for unexpected expenses. These loans typically offer quick funding, sometimes putting money in your hand as soon as the same day or the next day.
There are several different types of emergency loans available, including personal loans, cash advances and payday alternative loans.
Other options, including payday loans, auto title loans and pawnshop loans are best avoided due to their exorbitant costs and restrictive terms.
What Can I Use an Emergency Loan For?
You can generally use an emergency loan for just about anything you want, but they're best reserved for actual financial emergencies. Examples include:
- Medical bills
- Car repairs
- Home repairs
- Costs related to an unexpected death
- Loss of income
An emergency loan can be particularly beneficial if you don't have sufficient cash set aside in an emergency fund.
Where Can I Get an Emergency Loan With Bad Credit?
While most affordable financing options are reserved for people with good to excellent credit (FICO® Scores☉ of 670 or higher), you may still be able to get the cash you need with a bad credit score (FICO® Scores of 300 to 579). Here are some of the primary sources to consider.
Online Lenders
Online lenders are often more willing to work with bad-credit borrowers than traditional banks because they have a lower cost structure.
That said, repayment terms and interest rates can vary wildly with online lenders. While some offer reasonable annual percentage rates (APRs) and give you several years to repay, others charge triple-digit APRs and require repayment within a year or two. As a result, it's crucial that you shop around and compare personal loan options based on your credit profile.
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Banks
While rare, some banks offer emergency loans that can provide the assistance you need. You may start by checking with your current bank, and then researching other local banks to see what they offer.
Keep in mind, though, that many banks that offer traditional personal loans may require higher credit scores to get approved.
Credit Unions
Credit unions are nonprofit organizations owned by their members, so instead of maximizing profits to benefit third-party shareholders, credit unions use their revenue to provide lower interest rates and fees to their members.
One product where this approach makes a significant difference is the payday alternative loan (PAL). There are two types of PALs you may come across. Here's how they differ:
| Comparing Payday Alternative Loans | ||
|---|---|---|
| Feature | PAL I | PAL II |
| Loan amounts | $200 — $1,000 | Up to $2,000 |
| APR | Up to 28% | Up to 28% |
| Repayment term | 1 — 6 months | 1 — 12 months |
| Eligibility | Must be a member of the credit union for at least one month | Available immediately upon joining the credit union |
The caveat is that not all credit unions offer payday alternative loans, so you'll need to do your research, which can be challenging if you're in a situation where you need cash yesterday.
Learn more >> Emergency Loans: Where to Get the Best Ones
How to Choose a Bad-Credit Emergency Loan
As you research and compare your options, here are some important factors to keep in mind to ensure you're getting the best deal possible:
- Applicant requirements: Beyond credit score requirements, lenders will typically also have income requirements. In some cases, you may need to provide collateral to secure the loan. Focus on lenders that can give you good approval odds.
- Loan amounts: Some lenders may only offer a few hundred dollars or less, while others may be willing to lend you thousands of dollars. Depending on the severity of your financial emergency, skip the lenders that can't give you the amount you need.
- The cost of the loan: While some of the worst emergency loan options charge triple-digit APRs, others may offer more reasonable rates. As you compare your options, make sure you're comparing APRs because they incorporate all of the costs of borrowing.
- Repayment term: Depending on which type of loan you choose, your repayment term could be anywhere from a couple weeks to five years. If you don't expect your emergency situation to last long, you could opt for a shorter term. But if you're concerned about your ability to repay in the next few weeks or months, consider a longer term.
- Time to receive funds: If your situation is urgent, focus on lenders that offer same-day or next-day funding.
Other Sources of Emergency Money
While personal loans and payday alternative loans are often the most cost-effective emergency loan options, your situation may necessitate expanding your search. Here are some other potential options you may consider:
- Cash advance app: Also called a paycheck advance, this option could offer you between $50 and $1,000, which you'll typically repay by your next payday. While some cash advance apps don't charge interest, they may charge a fee to get your cash more quickly. Others may charge monthly fees, both of which could result in high APRs.
- Credit card cash advance: If you have a credit card that allows cash advances, you could tap some of your credit limit with an ATM withdrawal. Cash advance APRs tend to be higher than a card's purchase APR—and they also come with an upfront fee—but they're still less expensive than many other emergency loan options.
- Financial assistance programs: Depending on your needs, you may be able to get help with certain basic expenses through programs offered by the government and community organizations. If you need help with groceries, rent, utilities, housing costs, medical bills or other basic needs, call 211 to learn more about local resources.
- Borrowing from friends or family: If you have a loved one who is willing to help out, consider asking for a loan. To minimize the potential impact on the relationship, be sure to draw up an official loan agreement and pay it back as agreed.
- Payday loan: While a payday loan is technically an emergency option, it's always best to pursue other options. This is because payday loans charge staggering fees—you can expect an APR in the neighborhood of 400% or higher—and they typically require full payment within just a couple of weeks.
How to Improve Bad Credit
Once your financial needs are met, taking steps to improve your credit can put you in a better position to get affordable financing the next time something goes wrong. Here are some steps you can take to fix a bad credit score:
- Review your credit score and report. Start by checking your FICO® Score and Experian credit report for free. This will help you get an idea of where you stand and also pinpoint which areas you need to improve.
- Develop a positive payment history. Paying your bills on time is the best way to increase your credit score over time, so make it your top priority. If you're behind on payments, getting caught up can help avoid further damage to your score.
- Pay down credit card balances. Your credit utilization rate—the percentage of available revolving credit you're using at a given time—is another important factor in your credit score. Paying off credit card debt can provide a relatively quick improvement to your score.
- Avoid too many credit applications. As you work to rebuild your credit history, it's important to avoid applying for credit unless you really need it. While a single hard inquiry won't have much of an impact on your credit score, multiple inquiries in a short period can have a compounding effect.
- Get credit for non-debt payments. With Experian Boost®ø, you can add certain payments to your Experian credit file that typically don't get reported to the credit bureaus. This can include rent, utilities, phone, insurance and even some streaming subscription payments. Once you add your eligible payments, you'll get instant results.
Learn more >> How to Improve Your Credit Score Fast
How to Build an Emergency Fund
Another step you can take to minimize the impact of a future financial crisis is to build up your cash reserves. Here are some steps you can take to create your emergency fund:
- Set a goal. Financial experts recommend working toward having three to six months' worth of basic expenses saved, but it could take several years to accomplish that goal. Instead, start with a more reasonable goal that you can achieve within the next year or so based on your ability to save.
- Make room in your budget. If you don't already have one, take steps to create a budget by detailing your income and expenses over the past few months. Then, categorize your expenses, so you'll have a better idea of where your money is going. From there, you can identify areas where you can cut back and make more room for savings.
- Automate your savings. Once you've set a goal and determined how much you can save each month, set up automatic transfers from your checking account to ensure you don't accidentally spend the money earmarked for emergencies.
- Look for other saving opportunities. As you get used to saving money regularly, look for other ways you can build up your short-term savings. For example, you could set aside a portion of your annual tax return or your performance bonuses at work, or you can look for other ways to cut back on expenses, such as splitting streaming subscriptions or shopping around for cheaper car insurance.
Learn more >> Tips to Boost Your Emergency Fund
Frequently Asked Questions
In general, emergency loans offer quick funding, sometimes as soon as the same day or the next business day. It ultimately depends on the lender and how quickly they can process your application.
There's no universal minimum credit score required to get a personal loan. While a good credit score—FICO® Scores between 670 and 739—will often help you qualify for favorable interest rates and other terms, it's possible to get approved even with bad credit.
Ultimately, it depends on the type of loan you choose and the lender. While some options offer less than $100, others run into the thousands or even tens of thousands of dollars. When finalizing a loan amount, make sure you consider the repayment terms and how much you'll pay in interest over the loan term.
Focus on Preparing for Future Emergencies
You may not have the energy right now to focus on anything but your current situation. But as you address your financial needs, look for opportunities to start preparing for future financial storms by building an emergency fund and improving your credit score.
With Experian's free credit monitoring service, you can identify areas to work on and track your progress. You'll also get real-time alerts when changes are made to your report, making it easier to spot and handle potential issues as they arise.