Over 65.33 percent of Canadians have taken a personal loan or some other sort of emergency loan at some point. Usually, these loans are meant to help people take care of unexpected financial emergencies.
Everyone finds themselves in an urgent financial need at some point. When that happens, you may not have the spare time you need to raise the money on your own. Often, there’s no time to shop around for a loan with the lowest interest rates or friendliest repayment schedule.
An emergency loan can help you get out of the fix right away. In this guide, we tell you all you need to know about emergency loans, and how to choose the right one for you.
Read on to learn more.
What Is an Emergency Loan?
An emergency loan refers to an unsecured personal loan meant for an unforeseen emergency. Once you apply for such a loan, you can have funds deposited within two working days. However, the best providers take a maximum of 24 business hours to disburse loans into your account.
Types of Emergency Loans
People looking for emergency loans have several options to choose from. Below are five of them.
Most lenders approve unsecured personal loans for people with good credit. These fast loans have a fixed interest rate and are given out in one lump sum. Personal loans can be paid back in installments.
Credit Card Advance
You can use the available balance on their credit card to take out a cash advance. This type of emergency loan attracts a higher interest than what you’d pay for ordinary purchases. You’ll also be charged a processing fee.
As soon as you take the cash advance, interest starts accruing on it. That’s why you should only take what you need.
Payday loans refer to short-term loans that have to be paid back by the next payday. Unlike a personal loan that you can pay back in installments, you repay a payday loan at once. A payday loan can have an annual percentage rate (APR) of up to 400 percent, so you should be careful when taking one.
One of the challenges of payday loans is that borrowers can find themselves in a debt trap. In case you are unable to repay the loan, you might find yourself in a situation where you need to borrow again to repay what you already owe.
Pawnshop loans require the borrower to use a personal item to secure a loan. The pawnshop assesses the item’s value and keeps it as collateral for the loan. In case you don’t repay the loan, the item you sold as collateral is sold to make up for the amount you owe.
Pawnshop loans are ideal if you do not have good credit. That’s because the pawnshop doesn’t conduct a credit check when giving you the loan.
If you own a car, you can consider using the title to secure an emergency loan. Like pawn shop loans, title loans don’t involve a credit check. The only problem is that in case you don’t pay back the loan, your car could be seized.
When Should You Take an Emergency Loan?
There are many situations when taking an emergency loan is the ideal solution. These include:
Many people who take online loans do so to consolidate their debts. No one wants to carry multiple loans with different balances and interest rates due. Consolidating all these debts into a single monthly payment makes it easier for you to comfortably pay off outstanding balances.
To Pay Medical Bills
Medical procedures are another common reason people apply for emergency loans. These treatments range from dental work to fertility treatments to cosmetic surgery, all of which can cost thousands of dollars.
Other expenses such as medical travel, aftercare, and medications can also be effectively funded using emergency loans.
To Finance Funeral Costs
The sudden demise of a loved one can leave you financially stranded. Funerals can be expensive. There are costs related to the burial plot, funeral home services, a casket, and many more.
An emergency loan can help take the financial strain out of the funeral arrangements of your loved one.
For Home Remodeling
Emergency loans can also come in handy when you want to do a home improvement project but don’t have enough cash on hand. It could be that you want to install a new roof, do a kitchen remodel, or install a new HVAC. A personal loan can help you cover these expenses.
Emergency loans are especially ideal if you don’t have equity in your home or aren’t interested in getting a home equity loan. That’s because you don’t need to put up your home as collateral when getting a personal loan.
Sure, you may not need an emergency loan when relocating a short distance. But in the event of an unexpected long-distance move, such we when you’re relocating to another city for a new job, moving costs can be high enough to call for an emergency loan. An emergency loan can also help cover the costs of buying furniture and appliances for your new home.
Of course, you want to be sure that your new income can help you pay off the loan before you take an emergency loan. You don’t want to face the additional stress of struggling with a loan when trying to settle down in a new location and start a new career.
To Make a Big Purchase
Not everyone has thousands of dollars at their disposal at any given time. You may want to purchase a new car, boat, motorcycle, or tiny home but find that you don’t have enough money to fund the purchase. Cash loans can help make up the difference in such cases.
Emergency Loans Are the Answer When You Need Money Promptly
Financial emergencies can occur at any time and without warning. Fortunately, you can always get a suitable emergency loan to help you cover the cost. There are different options available, so you can always get a solution that will work best for your situation.
Are you looking for an emergency loan? Please contact us today to see what we offer.