Only around a quarter of Canadians have any rainy day funds. Unfortunately, our lack of national savings leaves us vulnerable when an unpredicted expense pops up.
When you need cash fast, you don’t have time to wait for a bank or credit union to take days or weeks to make a lending decision. If it’s an emergency, you may not even have time for a traditional personal loan to pay out – even when the bank works quickly.
Emergency loans are a type of instant cash loan that hands over the funds the same day, so you don’t have to wait.
What are emergency loans, and how do they work? Keep reading to learn how you can get the cash you need when you need it.
What Are Emergency Loans?
Emergency loans are a type of short-term loan that offers a small amount of cash (usually under $1,000).
These loans exist to help you cover last-minute emergencies, like late rent or expensive car repairs.
An emergency loan isn’t there to help you buy a car or even pay off other types of debt. In essence, it makes up for where your rainy day fund leaves off.
How Do Emergency Loans Work?
To get an emergency loan, you need to fill out an application. You need to provide:
- your name and contact details
- your job and how you get paid
- your bank details (including transit and account numbers)
- your safety contact (co-signer)
Emergency loans don’t require a credit check. Instead of running your credit report, the lender looks at your bank account to see how you manage your money. For example, they look to see how often your account is overdrawn and whether you get regular direct deposits.
The lender doesn’t log into your account or ever see your user ID or password. Instead, you share a copy of your bank statement through the instant verification process.
These show the lender that you do get money regularly and that you’ll be able to pay back the emergency loan.
How Quickly Do I Get the Money?
Instant verification also allows the lender to send the money to you quickly.
If the lender approves your application for an emergency loan, you will get a deposit on the same day.
The only exception is when you apply late in the day. Then, the money arrives in your account within 24 business hours.
How Much Does an Emergency Loan Cost?
Interest fees on emergency loans tend to be higher than a traditional personal loan because you pay them back over a few months instead of a few years.
Like all loans, you can expect to pay:
- Administration fees
- Brokerage fees
Missing a payment could cost you more money. You may pay a higher interest rate as well as NSF fees if your cheque bounces.
How Do You Pay Back an Emergency Loan?
You typically pay back an emergency loan in one lump sum because it constitutes only a small amount of money, usually not much more than one paycheck.
The lender provides you with a full payment schedule before you accept the cash. They outline:
- The amount due on the payment date
- The payment date
- How to make the payment
All you do is make the payment (plus interest and fees), and you’re finished. It’s that easy.
Can I Pay the Loan Back Early?
Yes, lenders allow you to pay the loan back earlier than planned if you have the money.
Captain Cash requires you to make the first payment through the automatic withdrawal we set up. However, you can pay off the rest of it as soon as you want – or according to your payment plan.
If you want to pay the loan back early, you can set up an automatic withdrawal or pay with a credit card payment.
What If I Miss a Payment or Can’t Pay Back My Emergency Loan?
The first thing to do if you anticipate missing a payment is to get in touch with your lender. Emergency loan lenders – like all lenders – want to know if you struggle to make a payment. Letting them know in advance is much better than skipping the payment because the lender may work out a new payment schedule so that you can pay back the loan successfully.
At Captain Cash, we allow you to defer your first payment for $25, which is less than the NSF charged for simply skipping the payment.
Two things can happen if you miss a payment.
First, the lender can add a new payment for each missed payment, which extends the length of your loan.
Second, missing multiple payments on an emergency loan without telling the lender can leads you straight to default. If you default on an emergency loan, then you could lose the collateral that you signed over in exchange for the loan.
If there was no collateral, then your loan goes into collection, and paying it off becomes much more complicated – and expensive. Your credit can also take a hit because debt collectors are happy to report to credit bureaus. What started as a simple solution can quickly become a huge hassle if you don’t communicate with your lender.
Are You Looking for an Emergency Loan?
A considerable number of Canadians can be caught short in the face of a financial emergency. When this happens, you may not have time to wait for a bank to process your loan application.
Emergency loans are there to help you cover last-minute expenses that need to be paid ASAP.
Applying is easy, and you get the money in a day – not a week.
Are you in need of an emergency loan? We can help. Get in touch to claim your cash.