Any life emergency can put stress on your physical, emotional, and financial well-being. Even if you’ve planned for the unexpected, you might need emergency lending.
An emergency loan is a loan you can get quickly to cover surprises expenses. This includes personal loans, cash advances, payday loans, and title loans.
In this article, we’ll cover what an emergency loan is, compare different types of emergency loans, and provide a few alternatives so you can confidently deal with emergency expenses.
What is a financial emergency?
A financial emergency involves unexpected expenses that need to be paid right away. They often require quick action and potentially high costs. These could include unexpected car repairs, home appliance failures, job loss, medical emergencies, or sudden pet emergencies. Planned life events, routine maintenance, and non-essential upgrades do not qualify as a financial emergency and should be part of your monthly budget.
What is emergency financial assistance?
In an emergency, you may need financial help with your situation. There are many options for borrowing funds including options like government aid, creditor hardship programs, insurance, and community resources. If you have time, you might explore the ins and outs of borrowing. If you need money in a hurry, an emergency loan could be a solution.
Four types of emergency loans
An emergency loan refers to a loan you can get quickly. There are several types of emergency loans. Here’s a brief overview of some of the different types of emergency lending options, and the key factors you should understand and consider before making any decisions.
Loan Type | APR Range | Typical Loan Amount | Funding Speed | Eligibility Requirements | Risk |
|---|---|---|---|---|---|
Personal Emergency Loans
| Around 6%–36% | Around $1,000–$50,000+ | Often same day to a few business days | Credit check, and income verification |
Missed payments could impact your credit score
|
Credit Card Cash Advances
| Around 25%–30% | 20%–30% of your credit limit | Immediate, typically can withdrawal from ATM | Must already have a credit card and available credit line |
May include a high APR and fees, leading to interest building quickly
|
Payday Loans
| Around 390% | Typically $500 or less | Typically same day instant funding | Proof of income, bank account, and ID |
Extremely high costs and rollover cycles can increase debt quickly
|
Title Loans
| Around 100%–300% or more | Based on vehicle value, $100–$10,000 or more | Often same day or within 48 hours | Vehicle title as collateral, plus an ID, proof of insurance and income check |
High APR could lead to accruing interest quickly and loss of vehicle if you default
|
Personal loans for emergencies
A personal loan for emergencies has several benefits and may carry less risk than other kinds of emergency loans. One feature is its flexibility. At Discover, you can choose from multiple repayment option to fit your budget—36, 48, 60, 72, or 84 months.
A personal loan could be used to pay for medical expenses, home improvements, car repairs, and many other unexpected costs. And it may also have a lower interest rate than other types of loans.
Credit card cash advances
A credit card cash advance lets you borrow money against your available credit limit. While convenient, this method could be expensive due to high APRs.
Before you choose a cash advance, check your credit limit and review the terms and conditions. How you get cash advance funds will depend on your credit card issuer. You may be able to go to an ATM or to your bank to withdraw cash.
Payday loans
A payday loan provides immediate cash based on the assumption that it will be paid back when the person receives their next paycheck. These often include extremely high interest rates and fees which may make it difficult to pay back the loan. Due to the predatory nature of these loans, many states have banned them.
Title loans
A title loan relies on the value of your car to use as collateral. Like payday loans, title loans often come with higher interest rates and are intended to be short-term. If you do not repay a title loan, the lender can take possession of your car.
Title loan lenders often insist that borrowers own their cars fully. If you are still financing your vehicle, you may need to explore other options.
Which emergency loan is best for you?
To know which emergency loan is right for you, you’ll want to do some research. The goal is to compare lenders and loans from several important angles.
Interest rates and eligibility
If you have excellent credit health, you might be able to get more attractive loan terms and interest rates. And if you have a relationship with a lender, that could also benefit you in an emergency. At Discover, we value our customers.
Total cost of borrowing
When rates and fees are high, the total cost of an emergency loan may increase. Some lenders charge origination fees, prepayment penalties, and more. With Discover Personal Loans, there are no fees of any kind.
Loan amount
Make sure the loan will be large enough to cover your emergency expenses. At the same time, you’ll want to avoid borrowing more than you need, because that could unnecessarily increase your total cost.
Funding time
In an emergency, it matters how quickly you receive your funds. So it’s crucial to know you can receive your emergency funds fast. At Discover Personal Loans, funds can be sent as soon as the next business day after your acceptance.
Repayment term
As you research your options, you’ll want to know how long it will take to repay the loan and whether you can manage the monthly payments. A longer loan may result in lower payments each month. But the extra months might mean you pay more in total interest than you would with a shorter loan, even if the interest rate is lower.
Alternatives to emergency loans
1. Tap into your emergency fund
If you have an emergency fund now may be the time to draw from it. Many experts recommend building one that could cover three to six months of expenses.
2. Lean on your personal network
While you deal with an emergency, you may need more than financial support. For example, you might need help with meals or childcare. Consider calling on family and friends for emotional or physical support and advice.
3. Check your insurance coverage
Damage to your home, car, or other property may be covered by your insurance policies. Be sure to look them over and talk to your agent or insurance company. You may be eligible for benefits you weren’t aware of.
4. Explore other alternatives
Depending on the situation, you may be eligible for government assistance. You could talk to your creditors to explain your situation and ask for help. You also might find some extra cash by rethinking your budget.
How to get an emergency loan
The process of applying for an emergency loan will depend on which loan option you choose. The four most common loan types are personal loans, credit card cash advances, payday loans, and title loans. These loans come with differing APRs, eligibility requirements, and risk factors.
With Discover® Personal Loans, you can apply online, and most people get a decision the same day. Because a personal loan has a fixed interest rate and one set regular monthly payment, you can estimate your payments and see if a personal loan may be right for you—and your budget.
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Frequently Asked Questions
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An emergency loan is a loan you can get quickly to pay for unexpected expenses.
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Most loan types offer options ranging from same day to a few business days to disburse funds.
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The information provided herein is for informational purposes only and is not intended to be construed as professional advice. Nothing contained in this article shall give rise to, or be construed to give rise to, any obligation or liability whatsoever on the part of Discover, a division of Capital One, N.A., or its affiliates.