No one wants to anticipate needing an emergency loan. Most people assume their hard work, preparation, investment strategies, and discipline will immunize them from life’s crazier accidents.
However, accidents are by their nature unforeseen, meaning you can’t always predict them and you can’t always financially prepare for them. Even if you have a savings account, a costly injury or illness can zap that into nothing fairly quickly. It’s not pleasant to think about it, but you have to prepare for the possibility.
That’s when emergency loans come into play. Here is a list of the most popular and reliable types of emergency loans for when your world gets turned upside down:
Unsecured and secured personal loans
Personal loans of this type are essentially installment loans that you repay on a fixed schedule. Based on the type of personal loan, you will either have to put up collateral or have good credit. WesternShamrock.com describes emergency loans with a fixed repayment schedule that may be available for both good credit and bad credit borrowers.
The terms will vary by lender but an unsecured personal loan is often used for emergencies because they do not require collateral and they usually come with fixed interest rates. Personal loans based on good credit history are typically easier to get, but you can also use collateral.
Payday loans are also popular these days because they are easy to get as long as you can prove employment. However, payday loans are typically good for smaller loans, usually under $500, which keeps the risk of default low for the lender.
So a payday loan may not be the right answer for an ongoing hospital stay that involves surgeries. However, a smaller emergency – for example, a car accident that requires you to get a rental for a few days – might call for a payday loan.
Credit card advances
Credit card advances are a type of loan in which you borrow against the upper limit of your credit card’s credit line. So if you go to your bank and they say that your credit card has a charging limit of $10,000 and your balance is $5,000, you may be able to borrow another $5,000 as a cash advance.
It’s important to note that credit card advances almost always involve higher interest rates and no grace period. As soon as you get the money, you start getting charged interest. As a result, this type of loan can easily be managed irresponsibly. A person on a gambling binge, for instance, may charge enormous credit card debts not realizing that the fees and interest are significantly higher than regular credit purchases.
Car title loans
This type of loan is exactly what it sounds like: you borrow against the value of your car title. It’s good for people who might not have great credit but can use their car as collateral. Such loans range across the spectrum, as low as a few hundred and as high as $10,000.
Such a loan usually carries high-interest rates and very short repayment timelines. Also, if you default on the payment, you can have your car legally taken from you. So borrow wisely.
Pawnshop loans are one of the oldest emergency loans because it allows someone in an emergency to use virtually any high-value object as collateral. Such loans are cheaper in terms of interest because if you default, the pawnshop owner just keeps your object for resale.
Items taken to pawnshops range from watches, musical instruments, and guns to paintings, memorabilia, or family heirlooms. Pretty much anything with objective financial value can be pawned.
You never know when an emergency is going to render you in need of immediate cash. You could be stranded in a foreign country without your wallet or cellphone. What would you do? You would need a quick emergency loan to get you back on your feet. The five loans listed above are a good start in such a situation.