Try as you might to avoid them, everyone encounters some form of unexpected expense or financial emergency eventually.
Whether it’s a broken down car, a medical mishap, or something else, you need some way to cover unexpected expenses. If your emergency fund isn’t sufficient to cover a bill, you’ll need a quick way to get money fast.
Though you may be tempted by quick, easy loans, some of them can often be bad options due to their fees and interest rates.
Personal loans are a safer alternative and can still get you the money you need quickly.
Avoid Dangerous Alternatives
When you encounter a financial emergency, it can be tempting to turn to the quickest solution.
Often, that will be a payday loan or credit card cash advance.
Though these seem quick and easy, their fees and interest rates make them a bad idea.
Payday loans are billed as a way to help people make ends meet while they’re waiting on their next paycheck.
They let consumers borrow small amounts of money for a couple weeks.
The idea is that someone takes out a payday loan, then uses their next paycheck to pay the balance off in full.
Unfortunately, it rarely works out this way. Payday lenders charge exorbitant fees and interest.
For example, a payday lender in Arkansas charges $17.50 in fees per $100 borrowed, with a maximum term of 28 days.
The equivalent interest rate would be 228.13% per year, and these numbers aren’t abnormal for payday lenders.
What tends to happen is that someone will take out a payday loan, but be unable to pay it in full when they get their paycheck.
So, they take out another payday loan. The cycle repeats over and over, with the person paying hundreds or thousands of dollars in interest and fees.
Even if you’re one of the people who manage to pay the payday loan in full the first time around, there are cheaper alternatives.
Credit card cash advances
Credit cards let people make large purchases without having to carry around huge amounts of cash.
They also give consumers the opportunity to earn rewards on their purchases.
The danger comes when people use credit cards to spend more than they have. Carrying a balance from month to month can be costly, as many cards charge 20% interest or more.
In addition to using them for purchases, most credit cards offer the option to get a cash advance. You can bring your card to an ATM and use it to withdraw cash, up to the limit set by the card issuer. However, cash advances can quickly get expensive.
Normally, when you make a purchase with your credit card, there’s a grace period where interest will not accrue. When you get a cash advance, interest starts to accrue immediately. Because credit card interest rates are so high, you could owe a lot of interest in a short time.
On top of the interest, you’ll also have to pay a cash advance fee.
Usually, the fee is the greater of a flat amount or a percentage of the amount of the advance.
If you got a cash advance for as little as $500, you could wind up paying a fee of $25 and then paying interest on your $525 balance.
How Personal Loans Work
It’s true that payday loans and cash advances can be dangerous, but not all short-term emergency loans are like that.
Personal loans are versatile loans that can help you meet a number of needs, including covering emergencies. Best of all, they can be much cheaper than payday loans or cash advances.
Personal loans are a type of loan that can be used for nearly any type of expense.
You can use a personal loan to fund home improvements, pay for a vacation, consolidate existing loans, or cover an unexpected expense.
There are two main types of personal loans.
Secured personal loans require that you offer some form of collateral. These are easier to qualify for and tend to be cheaper because lenders take on less risk.
Unsecured personal loans don’t require any collateral.
Personal Loans with Short Funding Times
There’s a huge variety of personal lenders out there.
Some specialize in small loans, while others will let you borrow as much as $100,00 or more. Some lenders let you pay your loan back over the course of many years, and others want to be paid back much more quickly.
No matter what your need is, you can find a personal lender to help.
There are some personal lenders that specialize in offering quick loans.
These lenders can get money to you in as little as a business day. Other lenders might take as long as a week or two to disburse the funds.
LightStream is an online personal lender that offers loans ranging from $5,000 to $100,000 with terms of two to seven years.
If you qualify, LightStream may be able to get the money to you on the day that you apply.
To qualify for a loan from LightStream, you have to have good credit, which is described by LightStream as meaning:
- Several years of credit history
- A mix of account types
- Good payment history with few or no delinquencies
- An ability to save, as evidenced by your assets (savings accounts, stocks, bonds, etc.)
- Sufficient income to repay your debts and a new loan
There are no prepayment, origination, or application fees. You can save .5% off your interest rate by signing up for automatic payments.
Upstart offers loans as small as $1,000 and as large as $100,000. You can make your payments over the course of three or five years.
Upstart claims to be able to make a more accurate assessment of borrower risk by looking at more than credit score. When you apply, Upstart will look at your credit, education, area of study, and job history. This means that you may qualify despite having poor credit, so long as you have a promising career.
Approved loans are funded within two business days. Education-related loans are funded within five business days.
Though Discover may be best known for its credit cards, it also offers great personal loans.
You can borrow from $2,500 to $35,000 with a same-day decision and funds arriving in your account within days. There’s no origination fee or application fee, so there’s no risk in applying for a Discover personal loan.
Other benefits include 100% U.S.-based customer service and the option to return your loan within 30 days without paying interest.
How to Increase Your Chances of Quick Approval
If you’ve encountered a financial emergency and need money fast, you want any loan you apply for the be approved quickly.
While most personal lenders have relatively short processes for approving loans, they do sometimes get held up. Lenders may want to ask you for more information or just want to take a bit more time to make a decision.
These are the ways you can improve your chances of getting approved quickly.
Having a good credit score never hurts when it comes to getting a loan. The higher your credit score, the easier it will be to get a quick approval.
Do your best to make on-time payments on all of your loans and try to not carry a lot of debt. Missed payments and high debts will hurt your score a lot.
Other things that hurt your score are applying for credit and having a lot of new loans. Avoid applying for loans or credit cards unless you really need them, as doing so will cause a short-term drop in your score.
Lenders primarily care about whether you’ll pay back the loan you’re applying for. The more money you make, the more money you have to pay a new loan bill each month.
When you apply for a loan, you’ll have to list your annual income. Make sure to list all of your sources of income, not just your day job. So long as you’re able to provide documentation of the income, include it on the application.
Having that higher income can get your application approved more quickly.
The less you borrow, the less risk the lender is taking on by giving you a loan.
Only ask a lender for the money that you need, don’t ask for any extra money.
The less money you ask for when making an application, the better the chance the loan will be approved.
Dealing with a financial emergency can be tough.
You may be tempted to use the quickest solution available, such as a cash advance or a payday loan.
Avoid this temptation.
These types of loans are incredibly expensive and can get you trapped in a cycle of debt.
Instead, look for a personal loan with a short funding period. They are much cheaper and can still get you the money you need quickly.