How to Get an Emergency Loan During COVID-19 Crisis
What are the types of emergency loans and where can people get them during COVID-19?
Emergency loans generally fall into 2 categories: payday loans and installment loans. They vary in their cost and length of loan as well as the qualifications a person must meet to qualify for either of them. Bank loans, credit cards, family, and friend loans, etc. are available to some and should be considered first choice for those that can get them.
What are some examples of emergency loans along with their pros and cons and how people can obtain them?
The 2 categories mentioned above are the most common form of emergency loans.
Payday loans are fee-based, short term loans with fast payback times, usually 1 month or less. They also are small loans, $500 is the maximum allowed in most states. One drawback besides the high fees is that more than a dozen states do not even allow them. The biggest plus for payday loans is that almost anyone will qualify if they have an income source of any kind, including disability, social security, unemployment, etc.
Installment loans are typically for $2,500 or more, although smaller amounts may be lent, and they have longer payback periods as well as lower interest rates. They are not fee-based but interest based. Even so, the interest rates are typically higher than any credit card. Like payday loans, installment loans are subject to state law and will vary in size and restrictions. A person must have better credit than for payday loans.
What are the big factors in choosing an emergency loan?
The amount of money you need is a critical factor in selecting your loan type as is the payback time. You should always seek the lowest cost loan possible that you can qualify for. If you can qualify, an installment loan is the best selection due to the longer payback period and lower interest rate but not everyone will be approved for this type of loan.
Can you get an emergency loan with bad credit? If so, how?
Yes you can get an emergency loan with poor credit. Bad credit payday loans are the most common way to get a loan when you have poor credit. Payday lenders are concerned with your income and rarely even do a credit check (like traditional lenders). Payday lenders approve a high percentage of those with bad credit who apply.
What are the average interest rates on emergency loans? Can you negotiate the rate?
It is rare you can negotiate the rate of your loan. For emergency payday loans you cannot negotiate rates as states that allow these types of loans have legislated the rates and term lengths and other factors and lenders must abide by the state laws. Installment loans are regulated, and some states have stricter guidelines than others and there are federal guidelines installment lenders must meet as well. You can negotiate the term of your payback for installment loans in some states.
What’s your best move on getting an emergency loan and why?
Review all your options first and try to get a loan with the lowest cost possible as well as the term that fits your ability to pay back the loan. Never accept a loan you are not confident you can pay back on time. If you can get a friend or family member loan you will save yourself a lot of money and even a credit card is better to use than an emergency loan.
Be careful as emergency loans can actually put you in a more difficult position than you are in. But if the loan will save you a bunch of NSF fees from your bank or utility shutdowns (with penalties, deposits, and other fees), then it may be the best decision financially.
