Best Emergency Loans of February 2022
What is an emergency loan?
An emergency loan is a personal loan you use to pay a medical bill, get a car repaired or cover another urgent expense. These loans can be secured or unsecured — unsecured loans are more widely available — and can come from an online lender, credit union or bank.
Check the lender’s requirements to see if you meet them. Lenders typically have minimum credit score and maximum debt-to-income ratio requirements. Some offer co-signed or joint loan loans, which may be easier to qualify for.
Look for a lender that can fund your loan quickly (the fastest lenders can usually approve you the day you apply and fund the loan the next day) and one that offers the loan amount you’re looking for.
Why we chose these lenders
Upstart is an online lending platform that considers alternative data on an application, including where you live and went to school, in addition to credit and income information. The company says it funds 99% of loans within one business day after approval.
Best Egg says its application takes minutes to complete, and loans are funded one business day after approval, in some cases. This lender offers free access to your credit score, so you can see how on-time payments benefit your score over time.
OneMain offers personal loans to borrowers with low credit scores, but they come with high APRs and an origination fee. The lender says on average, loan applications take one day to approve. Loans funded by ACH transfer take about one to two days after the loan’s closing date.
Universal Credit’s low minimum credit score makes it a good choice for fair or bad-credit borrowers. The lender may take a few days to approve a loan application, but if you can wait, you’ll get access to credit-building tools like credit monitoring and a credit score simulator.
Avant has a low minimum credit score requirement and says it can fund a loan one business day after approval. Its annual percentage rate includes an administrative fee up to 4.75%. The company reports payments to the three major credit bureaus — Experian, Equifax and TransUnion — which can help you build credit.
LendingPoint lends to borrowers with low credit scores, but it reports to only two credit bureaus. The company says approval takes minutes and funds are usually available the next day.
Oportun offers small installment loans to borrowers with little or no credit history at rates that are high compared to other bad-credit lenders. Oportun can fund loans within one to three days.
SeedFi loans combine personal loans with credit-builder loans by letting the borrower use some of the money immediately, and put the rest into a savings account. The borrower gets access to the savings account once the loan is repaid. These loans are best for someone who wants to cover an urgent expense now and build up an emergency fund for next time.
How to choose an emergency loan
Compare total cost: Speed may be your priority, but the loan’s total cost will have a lasting effect on your finances, so look for the least expensive loan — the one with the lowest annual percentage rate.
Most online lenders offer pre-qualification, which lets you preview your rate and term without impacting your credit score.
Check monthly payments: Weigh how the loan’s monthly payments will impact your budget to determine if you can comfortably pay it on time.
Use a personal loan calculator to see how much you can borrow and what rate and term you’ll need to make it affordable.
Consider funding speed: If you urgently need funds, consider a lender that offers fast funding. While some lenders offer next-day funding, most loans can be funded within a week after you apply.
Online lenders often disclose the timeline in an FAQ or blog section of their websites, so you’ll know what to expect before applying.
Gather the required documents — including W-2s, pay stubs and bank account statements — before you apply for a loan, and promptly answer the lender’s follow-up questions to keep the application process moving.
How to get an emergency loan with bad credit
A bad credit score (below 630 FICO) doesn’t automatically disqualify you from getting a loan, but your score is a factor lenders weigh the most heavily on a loan application.
Add a co-signer or co-borrower
Adding a co-signer or co-borrower can help your chances of qualifying or getting a good rate. A co-borrower has equal access to the funds, while a co-signer does not. If you can’t make loan payments, the co-signer or co-borrower is responsible for the loan.
Some lenders offer secured personal loans, which lets borrowers add collateral to the loan and can help bad-credit borrowers qualify. If you fail to make payments, the lender can take the collateral.
Turn to a credit union
Try your bank
If you’re a customer at Bank of America or U.S. Bank, you may be able to get one of their small-dollar loans. Bank of America’s Balance Assist offers up to $500 for a flat fee of $5. A Simple Loan from U.S. Bank can be up to $1,000, and the loan has a fee of $6 for every $100 borrowed. Both are repaid in three monthly installments.
Emergency loan alternatives
Cheaper alternatives to borrowing are not always fast or convenient, and sometimes they require asking for help. But NerdWallet strongly recommends exhausting alternatives first, even in an emergency. Here are some possible alternatives to an emergency loan.
Emergency loans to avoid
Payday loans are high-cost, short-term loans. Even in an emergency, they’re a risky option. Payday lenders charge fees that can equate to APRs of 400%, don’t check your credit score and may not confirm your ability to repay the loan.
But they do request access to your bank account or a blank check to withdraw the money you owe on your next payday. Borrowers who aren’t prepared to repay the loan by then often borrow again, causing them to slip into a cycle of debt.
Car title loans
With a car title loan, a lender assesses the value of your vehicle, and offers to lend you a percentage of that amount. If you accept, the lender holds onto the car’s title and you receive your loan.
The lender doesn’t usually review your ability to repay the loan, and can charge APRs of 200% to 300%. These loans are risky because the lender holds your car’s title. If you can’t pay, it’ll take your car.
Pawn loans can have lower APRs than payday and car title loans, but the risk is similar to car title loans: rates above 100% and the ability to lose something you value.
With a pawn loan, you hand over a valuable item to a pawnshop, they assess its value and give you a loan based on that assessment. You have to repay it, with interest, or they’ll keep your item.
If you manage to repay the loan but it takes too big a bite out of your bank account, you could end up borrowing from the pawnshop again.
No-credit-check installment loans
Be wary of online lenders that position themselves as low-cost alternatives to payday loans, but don’t check your credit. Some no-credit-check installment loans share similarities with payday and auto-title loans, including sky-high interest rates and additional fees that make the loan less affordable than they seem.
Capital Good Fund is a no-credit-check lender that offers lower rates, but loans are available in only a handful of states.
Tips to build an emergency fund
Once your emergency passes, build an emergency fund to avoid taking high-cost loans in the future.
Here are a few tips to get started with an emergency fund:
Set a savings goal. Most financial experts recommend saving between three and six months’ worth of living expenses. Starting with a goal to save at least $500 can usually cover small emergency expenses like minor car repairs.
Automate savings. Automatically transfer a small amount — maybe $10 or $20 dollars to start — into a separate savings account. That way, it’s out of sight, out of mind, but there when you need it.
Find an app to help you save. Some apps will round up your spending account transactions to the nearest dollar and deposit the change in a savings account. It’s like a spare change jar on your phone.
Put away windfalls. The last thing you want to do with birthday money is save it, but one way to start your emergency savings is to put away money that isn’t already spoken for, like small work bonuses, gifts and tax refunds.