No matter what you do, almost everyone is going to run into a financial emergency at some point. Whether it’s an unexpected visit to the hospital, a broken-down car, or the loss of a job putting a strain on your budget, there will come a time when you need help making ends meet.
If you don’t have savings to cover your costs, you might have to borrow money. One of the most popular ways to do this is with a personal loan. But if you have bad credit, this can be difficult, as many lenders refuse to offer loans to people who don’t have good credit.
That doesn’t mean that you have no options. It just means that you’ll need to consider emergency loans designed for those with bad credit.
Table of Contents:
The Best Emergency Loans For Bad Credit: Overview
Below is a quick look at some of the best places to search for an emergency loan if you have bad credit. We’ll discuss each one further in the article.
|LendingClub||Borrowing from regular people||10.68% - 35.89%||36 or 60 months|
|Prosper||Small amounts||7.95% - 35.99%||36 or 60 months|
|Upstart||People with good job or educational histories||8.69% - 35.99%||36 or 60 months|
Best Personal Lenders for Bad Credit
If you’re facing a financial emergency and need to borrow money, there are many lenders that can help you. Here are a few of our favorites.
LendingClub is a peer-to-peer lending site that helps people borrow up to $40,000 at APRs of 10.68% – 35.89% for anything from refinancing credit cards to paying for a hospital bill.
When you apply for a loan through LendingClub, you’ll outline both why you need to borrow money and how much you need. Then, LendingClub gives you a risk score based on your credit. Investors view your loan details and your risk score – then, willing investors pledge money to your loan.
When investors fully fund your loan, you’ll get the money and can use it to cover your financial emergency. When you pay your bill each month, LendingClub distributes it to the investors based on how much they invested in your loan.
A drawback of LendingClub is that it’s somewhat less flexible than other personal loans. The only available repayment terms are three and five years, which makes it harder to adjust your monthly payment.
LendingClub recommends a minimum credit score of 600.
Prosper.com offers personal loans between $2,000 and $40,000, making it a great choice for needs both small and large. Rates range from 7.95% – 35.99% APR and the loans come with origination fees ranging from 2.41% to 5%.
You can easily get an interest rate quote from the company’s website without impacting your credit. Loan terms are three or five years, giving you some chance to determine your monthly payment.
Prosper.com offers funding in as little as three days, and keeps fees to a minimum. For example, the company doesn’t charge an early repayment fee if you want to pay down your balance ahead of schedule.
Prosper recommends a minimum credit score of 640 but offers loans to those with lower scores.
Fiona isn’t a lender itself. Instead, it is a service that lets you compare multiple offers from top personal lenders.
What’s great about Fiona is that it can match you with lenders that meet incredibly specific needs. Do you want to borrow $100,000 – an amount that most lenders won’t be willing to lend? Fiona can help you find lenders who lend large amounts. Do you have poor credit? Fiona has a network of lenders that specialize in lending to people with less than ideal credit histories.
Best of all, Fiona doesn’t charge a fee for its services, so you can compare loan options for free. Credit score requirements and fees charged by lenders that Fiona works with vary.
The primary drawback of Fiona is that the company only refers you to lenders in its network. There might be other options out there that can give you a better deal, so it shouldn’t be a one-stop-shop for your lender comparison.
Upstart is a unique personal lender that looks at more than just your credit when considering loan applications. This makes it a great choice for people who have bad credit and need an emergency loan.
On top of looking at your credit, Upstart considers things like your employment and educational history. If you studied an in-demand field or have a solid job history, you might be able to qualify for loans you’d have trouble getting based on your credit score alone.
Rates range from 8.69% to 36.99% and loans can get approved and funded in as little as a day. Loan amounts range from $1,000 to $50,000, though some states have higher minimums.
The minimum credit score is 620, though Upstart can also approve loans for people with no credit score.
How We Came Up with This List
When choosing the best lenders for emergency loans for people with bad credit, we look for lenders that offer the best possible rates and fees while maintaining flexibility in repayment terms and the amount you can borrow.
Why does this matter?
- Fees and interest rates directly influence the cost of the loan.
- Repayment terms determine the monthly cost of the loan and how long it takes to repay.
People with bad credit typically have to accept loans that have higher fees and rates than people with good credit. Make sure you fully understand the fees, interest rates, and repayment terms of any loan you take out.
What is a Personal Loan?
A personal loan is a highly flexible type of loan offered by many banks and specialized lenders.
Unlike mortgages or auto loans, which are designed for specific purposes, you can use the money you borrow with a personal loan for almost anything. Personal loans are great for consolidating debt, paying a car repair bill, or funding a project.
Beyond their flexibility, personal loans are useful because they tend to offer reasonable interest rates. Where credit cards often charge double-digit interest rates, many lenders offer low rates on personal loans to people with good credit histories. This makes them a good way to borrow money at a low cost.
Many personal lenders also offer secured personal loans. These loans require some form of collateral, often a CD at the lending bank, but are easier to qualify for and charge even lower interest rates than the typical unsecured personal loan.
Why are Personal Loans Good for Emergencies?
Personal loans are good for emergencies for a variety of reasons.
One is that there are many banks and lenders that offer them. You can easily find half a dozen or more lenders to work with. This gives you the opportunity to compare multiple lenders and find the best deal for your situation.
Another is their customizability. Typically lenders will let you borrow anywhere from a few thousand to tens of thousands of dollars. You can also choose repayment terms ranging from two to five years. Some lenders, of course, break this mold, letting you borrow up to $100,000 or extend your repayment out to seven years or longer.
This customizability is useful because it makes it easy for you to set your monthly payment at an amount that falls within your budget.
How Do I Get an Emergency Loan with Bad Credit?
Whether you have good or bad credit, the first step to get a loan is to choose a lender and submit an application.
If you have bad credit, you should think about your odds of getting approval from each lender before you apply. Some lenders tend to target customers who have strong credit scores while others are more open to working with people with poor credit.
Also, consider the type of loan you’re applying for. If you have bad credit, a secured loan can be much easier to qualify for. The drawback is that secured loans require collateral, so you need to be able to provide backing for your loan, such as a bank account or a car. If you’re planning to apply for a secured loan, you’ll need to choose a lender that offers secured loans.
When you apply, you’ll have to provide some basic personal information, like your address and Social Security number. You’ll also want to have financial records ready since your lender might scrutinize your application more closely than other applications.
If you’re comfortable doing so, offering a written explanation of the reason you’re applying for a loan could help. A lender might be more willing to work with someone if they understand that you need help repairing a car so you can keep going to work compared to someone borrowing money to go on vacation. If you can show that your need for a loan is a one-time thing and not a pattern of financial irresponsibility, it could help.
The Most Important Things to Know About Emergency Loans for Bad Credit
The most important thing to know about emergency loans for bad credit is that you should avoid alternative and non-traditional lenders, like payday lenders, at all costs. Payday lenders charge incredibly high fees and interest rates, with effective rates often exceeding 100% or more.
If you get a loan from a payday lender, it’s easy to fall into a cycle of debt that you can’t escape. You should always work with more traditional lenders.
Also, keep in mind that even if a lender encourages you to apply for a loan or offers you a preapproval, you aren’t guaranteed to get a loan. Don’t put all of your eggs in one basket and bank on a single lender. Consider multiple options so you’ll have a backup plan if one application gets denied.
A common feature of loans for people with poor credit is a variable interest rate. These rates are often lower than fixed rates, at least to start with, which can make them a tempting way to try to save money. However, if rates rise, your monthly payment rises, possibly too high for you to afford. Picking a fixed interest rate might be more costly at first, but it provides security and peace of mind because you’ll know that your payment won’t change.
Finally, keep in mind that you can usually shop around without impacting your credit. Lenders can prequalify you for a loan and give you an estimate of the interest rate and fees that they’ll charge. Comparing multiple offers to find the cheapest one can save you a good amount of money.
How to Choose an Emergency Loan
When you’re choosing an emergency loan, you have to think about a number of things.
Because you’re experiencing a financial emergency, one of the most important things to think about is how long it takes the lender to distribute the money. Some lenders specialize in disbursing funds quickly while others can take weeks to approve your application and put the money in your account.
In an emergency, you want access to the funds as quickly as possible, which rules out slow lenders.
Beyond the speed of borrowing money, you should think about the loan amounts you can choose from. Lenders have different minimum and maximum loan amounts and you want to choose one that will let you borrow as close to the exact amount that you need as possible. Borrowing too little to cover your expenses doesn’t make sense and borrowing more than you need means paying more interest and fees.
Also, keep in mind the term options. Each lender has different term options, though terms ranging from three to seven years are common. Shorter terms mean higher monthly payments but a cheaper loan overall. Longer terms reduce your monthly payments but make the loan more expensive in the long run. You should find a lender that lets you choose a term that strikes a balance between monthly affordability and overall loan cost.
Emergency Loan FAQs
Just because you have bad credit doesn’t mean you can’t get an emergency loan. However, it does mean that you’ll likely have to pay more for the loan and your choice of lender will be more restricted. Still, it’s worth taking the time to compare a few different lenders to try to find the best deal.
Once you get past your financial emergency, take steps to build an emergency fund and improve your credit to avoid finding yourself in a similar situation in the future.