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Ashley Maready
The unexpected happens to everyone. And sometimes, the unexpected comes with an alarming price tag. An emergency loan can help you deal with a sudden and real need for cash.
What is an emergency loan?
An emergency loan is a loan that can cover unexpected expenses, like:
- Car repairs
- Home repairs
- Legal expenses
- Medical bills
- Pet medical bills
- And more
Emergency loans can be for personal or business use. Emergency personal loans are usually for a relatively small dollar amount. Emergency business loans are sometimes larger.
In either case, an emergency loan can help you bridge the gap between an urgent situation and stable finances.
How do I get an emergency loan?
The path to the right emergency loan program is different depending on why you need the money and your credit standing.
Here are some of the options you can explore if you're looking for an emergency loan:
- Personal loans (can be used for any personal expenses)
- Loans for unemployed individuals (for costs related to job loss)
- Hardship loans (for unexpected financial emergencies)
You can also look for loans specific to your situation, such as:
If your credit isn't very high, you might also want to consider:
We'll go into some more options in greater detail in the next section.
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.
| Loan type | Credit check required | Personal use | Business use | Typical cost |
|---|---|---|---|---|
| Unsecured personal loan | Yes | Yes | Sometimes | 8% to 36% APR |
| Secured personal loan | Sometimes | Yes | Sometimes | 8% to 36% APR |
| Payday loan or storefront cash advance | No | Yes | Not usually | 400% to 1000% APR |
| Payday Alternative Loan (PAL) | No | Yes | No | 14% to 28% APR |
| Title loan | No | Yes | Sometimes | 36% to 800% APR |
| Credit card cash advance | No | Yes | Yes | 18% to 36% APR |
| SBA disaster loan | Yes | Yes | Yes | 2.5% to 8% APR |
| Specialty loan (such as dental or veterinary) | Yes | Yes | No | 0% to 36% APR |
| SBA Economic Injury Disaster Loan (EIDL) | Yes | No | Yes | 3.75% APR |
| Private emergency business loan | Yes | No | Yes | 6% to 36% APR |
Plan for the unexpected
There's no use wondering if the unexpected will happen. It will. Sometimes, life's curveballs are simply unavoidable. That's true for us all, whether you're financing a divorce or a medical emergency. One way you can be prepared is by creating an emergency fund. Use our emergency fund calculator to see how much cash you should have saved.
If an emergency caught you off guard recently, don't feel bad -- it happens to everyone. Look at the best loan options for you, get back on your feet, and don't forget to prepare for the next curveball of life.
Need a loan? Check out The Ascent's guide on how to apply for a personal loan.
The Ascent's best personal loans
Looking for a personal loan but don’t know where to start? Our favorites offer quick approval and rock-bottom interest rates. Check out our list to find the best loan for you.
FAQs
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The best way to access small dollar loans is to set up a payday advance app before you need it. Apps like Brigit and Boro allow you to get a free cash advance with no credit check. The repayment term is anywhere from two weeks to one year.
Try to avoid payday loans because they are extremely expensive. Most people have to renew their loan many times (and pay fees each time) before they're able to get caught up and pay off the loan. A cash advance from your credit card, if you have one, would probably be cheaper.
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Some kinds of loans are funded on the same day you apply. That includes payday loans and credit card cash advances. Personal loans can be funded within one to three days after your application is approved.
When it comes to fast loans, there's a caveat. You should expect same-day cash loans to be expensive. This matters because if you're short on cash, your financial situation may become a lot worse by taking an expensive loan. If you don't have $100 now, will you have $120 to repay the loan next week? If not, consider the very real possibility that a fast cash loan will hurt you more than it'll help.
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Many banks and credit unions offer emergency loans. The best way to find out is to call your bank or credit union, or visit a branch. If it doesn't have a program you qualify for, you can check with online lenders like Upstart or Best Egg. Search for "online emergency loan" for other options you can consider.
Our Loans Experts
Kimberly is a career writer and editor with more than 30 years' experience. She's a bankruptcy survivor, small business owner, and homeschool parent. In addition to writing for The Motley Fool, she offers content strategy to financial technology startups, owns and manages a 350-writer content agency, and offers pro-bono financial counseling.
Fact Checked
Ashley Maready
Ashley Maready is a former history museum professional who made the leap to digital content writing and editing in 2021. She has a BA in History and Philosophy from Hood College and an MA in Applied History from Shippensburg University. Ashley loves creating content for the public and learning new things so she can teach others, whether it's information about salt mining, canal mules, or personal finance.
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We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent, a Motley Fool service, does not cover all offers on the market. The Ascent has a dedicated team of editors and analysts focused on personal finance, and they follow the same set of publishing standards and editorial integrity while maintaining professional separation from the analysts and editors on other Motley Fool brands.
Kimberly Rotter has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Upstart. The Motley Fool has a disclosure policy.
We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent, a Motley Fool service, does not cover all offers on the market. The Ascent has a dedicated team of editors and analysts focused on personal finance, and they follow the same set of publishing standards and editorial integrity while maintaining professional separation from the analysts and editors on other Motley Fool brands.
Kimberly Rotter has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Upstart. The Motley Fool has a disclosure policy.