Bad credit emergency loans: A guide

"I need a loan urgently with bad credit." These words can evoke a sense of anxiety in anyone, especially when faced with financial emergencies. 

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Although traditional lending may feel out of reach if you're grappling with bad credit, you can, in fact, find solutions to meet your financial goals. 

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This post will explore a common product for bad credit borrowers: emergency loans. Learn lenders, ways to improve your chances of qualifying, and alternative options that may be a better fit for your needs.

What is an emergency loan?

An emergency loan is a personal loan that you can use to cover unexpected or urgent expenses, like medical bills or pressing home repairs. The approval process is quick, helping you access the cash you need in just a few business days. 

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Borrowing amounts, repayment terms, and interest rates vary depending on the lender and your creditworthiness. This flexibility allows you to find lenders offering anywhere from $1,000 to $100,000 at an interest rate of 7% to 36%. Repayment begins almost immediately and consists of fixed monthly payments over 1 to 7 years.

Are there emergency loans for bad credit?

Your credit score is one of the most important factors a lender will use to gauge your trustworthiness as a borrower. For this reason, getting an emergency loan with bad credit can be challenging—but not impossible. 

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For borrowers with bad credit, lenders offer higher interest rates and less attractive loan terms. Although a loan can be a lifeline when you need it, it's important to weigh how higher borrowing costs and a more aggressive repayment period will impact your financial situation. 

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Current average rates by credit score are:

• 720-850 credit score: 10.73%-12.50% interest rate
• 690-719 credit score: 13.50%-15.50% interest rate
• 630-689 credit score: 17.80%-19.90% interest rate
• 300-629 credit score: 28.50%-32.00% interest rate

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While these are averages, your lender will determine your final rate. 

Bad credit emergency loan lenders

Finding a lender willing to work with you is the first step toward finding financial relief. This could take time as you'll need to identify low-credit lenders and thoroughly evaluate each option. 

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To start, consider reaching out to see what your current bank or credit union offers. Given your existing relationship, they might be more open to working with you—and possibly offer better terms. 

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Shop around and explore online lenders, too. Again, be sure to read the terms and conditions, and assess their reviews. 

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Well-known low-credit lenders include: 

• Upstart
• Avant
• Lending Club
• Best egg
• Upgrade

Other urgent loans for bad credit borrowers

Whether you've had difficulty qualifying for a personal loan because of a less-than-ideal credit history or simply want to find the best solution for your needs, it's worth exploring alternative types of urgent loans for bad credit.

Peer-to-peer loan

Peer-to-peer lending is a newer financing solution that allows you to use an online platform to connect with—and borrow directly from—one individual rather than a financial institution. However, there’s no guarantee someone will lend you the cash. 

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How it works: You create a listing that details the amount you need and the purpose of the loan, and lenders can choose to fund the entire asking amount or part of it. After receiving your cash, you’ll be on the hook for fixed monthly payments.

• Loan amount: Anywhere from $1,000 to $50,000
• Requirements: 600 or higher credit score and a debt-to-income ratio of 20%-30%
• Rate: 7%-35%
• Funding timeline: 1-5 business days
• Repayment terms: 2 to 5 years; monthly payments
• Considerations: You’ll be responsible for origination fees and any other fees an investor places, which vary. 

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Popular peer-to-peer lending marketplaces include Prosper, Upstart, Funding Circle, and LendingClub. 

Payday loans

A payday loan is a short-term, high-interest loan. Unlike a traditional loan, where eligibility is based on your credit score, payday loans are based on your income. They’re often considered predatory lending because rates can be as high as 300% APR—trapping many in a vicious borrowing cycle. 

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How it works: Lenders allow you to borrow up to a set portion of your paycheck, which you repay within a given term. 

• Loan amount: Typically $50-$1,000
• Requirements: A bank account, paystub, and sufficient income
• Rate: A flat fee, which can be anywhere from $10 to $30 per $100 borrowed
• Funding timeline: 1-5 business days
• Repayment terms: Under 30 days and due all at once
• Considerations: Payday loans can be a tempting option—especially if you haven’t had much luck securing a personal loan. However, because of the high interest rates and fees, they should be considered a last resort. 

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Bad credit payday lenders can be found online—just be sure to do your due diligence and read reviews and terms. 

Payday alternative loan

Payday alternative loans, or PALs, are safer than traditional payday loans. They’re offered by federal credit unions and typically have lower interest rates and longer repayment terms.  

• Loan amount: Up to $2,000
• Requirements: A bank account, paystub, sufficient income, and an okay credit score
• Rate: A max APR of 28%
• Funding timeline: 1-5 business days
• Repayment terms: 1 to 6 months
• Considerations: You must be a member of the credit union to qualify.

Cash advance apps

If you need quick funding, cash advance apps are how to borrow $500 instantly. The loans work similarly to payday loans but are safer and more affordable. With various lenders in the market, you can find terms that work best for you. 

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How it works: The process is straightforward. You use an online platform to access your cash before payday. Then, the platform automatically repays the loan with your next paycheck. 

• Loan amount: $500, though few lenders will go as high as $1,000 depending on your income
• Requirements: A checking account, direct deposit, sufficient income
• Rate: Typically, a flat 5% fee for the transaction; some platforms require a subscription fee
• Funding timeline: Same day
• Repayment terms: Until your next payday
• Considerations: Most platforms only allow you to borrow again once your debt has been repaid, helping you beat a vicious debt cycle. However, the transaction cost and subscription fees can feel steep for such a small amount of money borrowed. 

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Well-known cash advance apps include Dave, Varo, MoneyLion, and Payactiv. 

Title loans

If you have poor credit, offering collateral is an easy way to improve your chances of qualifying for a loan. A title loan is one type of secured financing option that leverages your vehicle in exchange for money. These types of loans are similar to payday loans in that they have exceptionally high interest rates, making repayment difficult. Of course, if you fail to meet your payments, the lender can repossess the car. Once again, title loans and payday loans should really only be considered as a last resort. 

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How it works: You provide your car title to a lender in exchange for a loan based on the vehicle's value. You can continue to drive your car while paying off your debt.

• Loan amount: Up to 50% of your vehicle’s value
• Requirements: A car that you own outright; credit score not considered
• Rate: Roughly 25% per month, or a 300% annual interest rate‍
• Funding timeline: Same day‍
• Repayment terms: 15 to 30 days, with fees incurring for every additional month‍
• Considerations: Title loans offer immediate relief when in times of financial distress; however, high borrowing costs can put you in the risky position of losing your vehicle or needing to take on more debt. 

Alternative options 

Depending on how urgent your situation is, what you need to accomplish, or how much you need, a personal loan may not be your best option. 

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In fact, you should explore other solutions if:

• You can wait a week to a few weeks for cash.
• You have assets that can be leveraged.
• A personal loan will put you further into debt or financial hardship.
• You don’t qualify for a personal loan.

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If this sounds like you, vet the following: 

Credit card cash advance

A credit card cash advance allows you to pull money from your credit card at an ATM or bank branch. The amount you borrow is typically subject to a fee and higher interest rate than your standard credit card purchases. 

• Loan amount: Up to 20% to 30% of your available credit limit
• Requirements: An eligible credit card and balance 
• Rate: Approximately 30%‍
• Funding timeline: Same day‍
• Repayment terms: Vary depending on the company‍
• Considerations: If you need a smaller amount of cash and have a card in good standing, you can withdraw money without going through an approval process. However, be prepared to repay the loan at a higher interest rate. 

Home equity loan/HELOC

If you're a homeowner who's worked hard to build up the equity in your home, consider tapping into it to meet your needs. Home equity loans and home equity lines of credit (HELOC) are types of secured loans that allow you to use your home as collateral. 

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With a home equity loan, you can get a lump sum of money and repay it over a fixed term with a fixed interest rate. 

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HELOCs, on the other hand, act like a revolving line of credit, allowing you to withdraw funds as you need up to a set limit over a 10-year draw period. 

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Although you typically need good credit to qualify, some lenders may be willing to work with you, so long as other areas of your financial health are strong. 

• Loan amount: $20,000 to $400,000 
• Requirements: Sufficient equity (15%-20% owned), 620 credit score or higher, a debt-to-income ratio of 43% or lower
• Rate: Competitive and vary depending on the lender; 9% to 12%‍
• Funding timeline: 4 to 6 six weeks‍
• Repayment terms: Terms range from 5 to 30 years ‍
• Considerations: If you default on the loan, you could lose your home. HELOCs and home equity loans also have associated appraisal fees and closing costs.  

Home equity investment 

If your credit score or income is holding you back from a traditional equity product, then you may wish to consider an HEI. A home equity investment (HEI) is another way to tap into your home's wealth for cash. You can receive a single lump sum in exchange for a share of your home's future appreciation. 

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HEIs do not have monthly payments; instead, you repay your investment at the end of a flexible 30-year term or when you sell your home. 

• Loan amount: $20,000 to $500,000
• Requirements: Sufficient equity (varies by provider), 500 minimum credit score requirement, no income requirements
• Rate: Repayment costs depend on home appreciation, not an interest rate‍
• Funding timeline: Roughly 30 days‍
• Repayment terms: From 10 to 30 years ‍
• Considerations: Like other equity financing tools, you’ll be responsible for appraisal fees and closing costs. HEIs are also not available in every state, so you’ll need to research reputable lenders. You can prequalify for an HEI without impacting your credit score. 

401(k) loans or hardship withdrawals

It’s generally not advised to treat your nest egg like a piggybank. However, depending on the severity of your needs, it may be the best solution for you. 

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There are two main ways to get cash from your retirement account: 401(k) loans and 401(k) hardship withdrawals. 

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401(k) loans allow you to borrow against your retirement savings account up to a certain percentage of your vested account balance. You'll be responsible for repaying the loan within five years through payroll deductions. Although borrowing from yourself may seem like the easiest option, it’s important to remember that you’re gambling with your future financial security.

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On the other hand, a 401(k) hardship withdrawal can help you tap your retirement account in cases of financial hardship. The withdrawal can be penalty-free, and you don’t have to pay the funds back. Qualifying hardships include expenses to prevent foreclosure or eviction, medical bills, funeral or burial costs, education-related expenses, homebuying costs on a primary residence, and damage to your home caused by natural disasters. Because a 401(k) hardship withdrawal does not need to be repaid, you risk falling behind on your retirement goals if you can’t rebuild your savings aggressively at a later time. 

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In either case, you'll need to contact your 401(k) plan manager to explore your options. They will guide you through the eligibility criteria and help you initiate a withdrawal.

• Withdrawal amount: Loan amounts vary depending on the plan; hardship withdrawals are usually enough to cover the costs 
• Requirements: An eligible 401(k) plan
• Rate: Between 9.50% and 10.50% for 401(k) loans‍
• Funding timeline: Days to a couple of weeks‍
• Repayment terms: 5 years for loans ‍
• Considerations: You should consult a financial advisor before borrowing against or leveraging your retirement account. 

Grants

Taking on debt will always be a risky move. Even with the most competitive rates, your loan will only be a temporary bandaid if you can't commit to repayment. Exploring local, state, and federal grants is a smart strategy—and worth the added effort. Unlike loans, grants don't need to be repaid—which is the ultimate source of financial assistance. 

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Common grants include:

• Emergency financial assistance
• Utility assistance
• Housing grants
• Rental assistance
• Food assistance (like the Supplemental Nutrition Assistance Program (SNAP))
• Disaster relief 
• Medical bill assistance 
• Small business grants

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Grants are available through government agencies, foundations, and charitable organizations. Eligibility criteria and application processes vary by grant program. 

Tips to get an emergency loan with bad credit

• Check your credit score: Are you taking advantage of your free credit report? Be sure to get your copy and review it for any errors or discrepancies. Disputing any inaccuracies will help increase your score. 
• Shop around: Although you may feel a sense of urgency, don't settle for the quick-win option. Shop around and compare products, rates, terms, and fees from multiple lenders to find the best deal. This can prevent you from falling into a predatory loan, save you thousands in interest, and help you avoid taking on more debt in the future. 
• Apply with a co-signer: A co-signer with good credit can strengthen your loan application. Just remember, they agree to take responsibility for the loan if you default. For this reason, be sure to work with a trusted friend or family member and have an open conversation about the impact of cosigning. 
• Reduce your DTI: Lenders also use debt-to-income (DTI) ratio to gauge creditworthiness — a lower DTI is preferred. The ratio is the percentage of your total income that goes to paying down monthly debts. You can reduce your DTI by paying down existing debt or increasing your income. 
• Avoid hard inquiries: If you've thought, "I need money desperately," then you're probably tempted to start applying for various products—don't. Hard pulls on your credit can lower your credit score and reduce the likelihood of getting approved. Find opportunities for preapproval instead. 

Frequently asked questions

How much will an emergency loan cost?

The true cost of an emergency loan varies depending on the lender, loan amount, repayment term, and your creditworthiness. 

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Most lenders charge an origination fee, typically between 1% and 5% of the loan. They may also charge processing fees, late payment fees, and prepayment penalties. 

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Rates for emergency loans with bad credit tend to be higher than traditional loans, so you can expect to pay a hefty amount of interest. For example, borrowing $10,000 at a 29% APR and 7-year repayment term will cost you $13,455.86 in interest over the life of the loan. 

Is a secured or unsecured loan better?

Only you can decide if a secured or unsecured loan makes sense for your situation.

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A secured loan might be a good idea if:

• You don't qualify for other debt products.
• You need access to a large amount of cash.
• You need a longer repayment term than a few years.
• You want a more competitive interest rate. 
• You have assets to leverage.
• You're confident you'll be able to repay the loan. 

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An unsecured loan might be a good idea if:

• You need cash in just a few days.
• You don't need a large amount of money. 
• You don't have collateral to leverage. 

What is the fastest way to borrow money?

Cash advance apps or payday alternative loans offer near-immediate approval and funding. However, as discussed earlier, be sure to read the terms and conditions and consider the impact on your finances. Avoid predatory lending or scams by thoroughly checking into any lender or provider. 

Final thoughts

When financial hardship hits, it can be difficult to see a way out—especially when you have less-than-ideal credit.

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Bad credit emergency loans offer some relief if you can meet the requirements. However, they're not the only way to handle urgent or unexpected expenses. By exploring alternative lending options and improving your ability to qualify, you can increase the number of options you have available to you—and possibly secure better terms. 

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Just be sure to approach borrowing cautiously and only borrow what you can afford to repay. 

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Find your financial fresh start with a Home Equity Investment from Point. There are no monthly payments, no income requirements, and no need for perfect credit. Prequalify today with no impact on your credit score. 

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