In a perfect world, you could budget for every unexpected cost. However, it’s important to be prepared for the possibility that unforeseen costs will arise.
If you don’t have the funds on hand, getting a loan might be a good idea. You should learn the ins and outs of loans, be prequalified, and weigh your choices before applying for one.
However, if you need cash quickly, you may discover that other options are preferable.
What Exactly is a Short-term Loan?
An emergency loan is a short-term, small-dollar unsecured loan used to pay for unexpected costs like those associated with a car repair or medical care.
Personal loans, cash advances on credit cards, and quick cash loans are just a few of the options available for those in a financial bind.
Five Things You Should Think About Before Applying for an Emergency Loan
There is a wide variety of emergency loans available; nevertheless, it is important to weigh all of your alternatives before choosing one.
1. One’s credit rating
When deciding whether to provide you an emergency loan, most financial institutions will look at your credit score. Higher credit scores make it more likely that you’ll be approved for a loan and given favorable conditions in the event of an emergency. Don’t fret if your credit isn’t perfect; some lenders are willing to work with clients who have less-than-perfect ratings.
2. The Length of Time It Takes To Pay Back
Time to repay a short-term loan is the period of time you have to pay it back. The time period may be a few months or many years. Longer repayment period results in cheaper monthly payments, but more interest paid overall. Consider a shorter loan term if you’d like to save money on interest. Make sure the regular payments won’t put too much strain on your budget.
3. Amount of Interest
The total amount you pay for a loan is based in large part on the interest rate, so it’s in your best interest to secure the lowest possible rate. Those with less-than-perfect credit histories may be required to accept a higher interest rate. The bright side is that timely payments might raise your credit rating, which in turn may lead to lower interest rates in the future.
4. Funding Plan
Consider your monthly budget to see if you have room for the loan installments. If you find that sum to be unmanageable, you have the option of extending the length of your payments at the expense of a higher total interest cost. Another option is to reevaluate your situation and seek a smaller loan with more manageable monthly payments.
5. Money and Wait
It’s understandable to desire quick access to the money you’ve borrowed in the event of an emergency. Online instant loans are known for their speedy payouts, typically occurring within 24 hours to a few days of the loan request being submitted. There may be a lengthier wait time between applying for a loan and receiving funding from a traditional lender like a bank or credit union.
If you are short on funds and have run into an unforeseen financial snag, an emergency loan may be your best option. To help you get your finances back on track, several lenders provide forgiving qualification standards and prolonged repayment terms. However, you could find that it may not be the best option for your financial situation.