Contrary to popular belief, it’s possible to get a personal loan even if you have bad credit. This is why it’s important to consider all loan options before turning to high-cost, predatory loans like payday loans when you face an emergency. You may be able to find a more affordable option, even if you have bad credit.
We chose Upgrade as our top lender for the best emergency loan for bad credit because it offers a competitive rate of 5.97% to 29.99%, loans up to $50,000, and repayment terms up to 84 months. Plus, you could qualify with a credit score as low as 550 and you have the option to apply with a co-borrower. What’s more, Upgrade can get you the emergency loan funds you need as quickly as one business day after your loan is approved.
Guide for Choosing the Best Emergency Loans for Bad Credit
Do You Qualify for an Emergency Loan If You Have Bad Credit?
Having bad credit doesn’t mean you can’t qualify for an emergency loan. Rather, you’ll need to be able to show that you have income sufficient to repay the loan, usually measured by your debt-to-income ratio. Plus, your credit reports will need to show that whatever caused your bad credit score has been resolved (e.g., you’re not delinquent on any of your loans and you’ve resolved any tax liens or other judgments.)
If your credit issues haven’t been resolved or you don’t have enough income to repay the loan on your own, then you might consider applying for an emergency loan with a co-applicant. This is because you’ll be able to rely on your co-applicant’s good credit history rather than your own to get qualified. If you choose this option, make sure to repay the loan or you could damage your relationship with your co-applicant. Remember, delinquencies will affect their credit scores.
Comparing Emergency Loan Lenders for Bad Credit
When considering an emergency loan, some of the most important factors to consider include how much the loan will cost, the terms you can get, and how quickly you can apply and get funded. Some of the most important factors to consider when comparing emergency loan lenders for bad credit are:
- How much the emergency loan will cost. The cost of an emergency loan is made up of the interest rate you’re charged and the fees you’ll pay to get the loan. A loan’s APR, or annual percentage rate, represents the sum of these two costs. For this reason, the APR is the most useful cost to evaluate when comparing lenders.
- What terms you can get on the loan. Before choosing a lender, ensure it offers the repayment terms you need. Shorter repayment terms will result in higher payments since you’ll pay the loan off more quickly. This means you’ll also end up paying fewer interest charges over time. Look for a lender that offers the shortest repayment term you can comfortably afford.
- How quickly you can apply and get funded. It’s also important to evaluate how easy it is to apply for the loan and how quickly you’ll get funded. These two factors are often related since lenders that offer an easy online application process may also offer fast funding. Many of the best lenders offer approval in minutes and funding in as few as one to three business days (sometimes even the same day).
How to Apply for an Emergency Loan if You Have Bad Credit
Before applying for an emergency loan, first gather your personally identifiable information (e.g., Social Security Number, date of birth, address), income information, and details about the funding you need (e.g., loan amount and purpose). This will make the application process easier, as lenders will require you to provide this information.
You’ll usually submit a preliminary application with basic details to see if you can qualify, which won’t affect your credit if the lender uses a soft credit check. The lender will tell you if you can qualify and the rates and terms you might be able to receive. If the rates and terms are acceptable to you, you’ll proceed with the full application. A hard credit inquiry will be performed, which will affect your credit scores, and you may need to provide additional documentation, like pay stubs or bank statements.
If you’re approved for a loan, you’ll need to review and accept the final loan terms. Then, the lender will send you the funds in the manner specified in your application. For instance, depositing the funds into your checking account or disbursing the funds directly to your creditors. Finally, you’ll need to set up your account via an online portal or mobile app so you can manage your loan.
Frequently Asked Questions
What Is an Emergency Loan?
An emergency loan is a term used to describe several different methods of accessing cash for sudden, unexpected expenses. One of the most common types of emergency loans—and often one of the most affordable options—is a personal loan. However, an emergency loan may come in the form of a cash advance, a high-cost payday loan (avoid these if possible), a loan from a friend or family member, or a lower-cost payday alternative loan (PAL) from a credit union.
Can I Get an Emergency Loan With Bad Credit?
Borrowing options do tend to be more limited when you have bad credit. Still, that doesn’t mean you’re automatically out of luck. You may be able to qualify for an emergency loan even with bad credit.
It is important to have realistic expectations when trying to borrow money with credit challenges, especially where cost and borrowing limitations are concerned. Due to the fact that there’s more risk involved for the lender, emergency loans for those with bad credit can be expensive.
Higher APRs and fees are common with bad-credit emergency loans. And as a bad-credit borrower, you may not be able to borrow as much money as someone with a good credit score. On the bright side, there are smart strategies you can use to improve your credit rating over time.
Where Can You Get an Emergency Loan If You Have Bad Credit?
Multiple types of lenders offer emergency loans for bad credit. Some of the most common options include:
- Online lenders
- Credit unions
- Traditional banks
- Credit card companies (cash advance)
- Relatives and friends
- Payday lenders
Remember, just because a borrowing option is available doesn’t mean it’s a good choice. Credit card cash advances, for example, are notoriously expensive and might damage your credit score by driving up your credit utilization rate.
It’s also a good idea to avoid payday loans and title loans whenever possible. The Consumer Financial Protection Bureau (CFPB) warns that the average 2-week payday loan features a steep APR that’s equivalent to nearly 400%.
Will an Emergency Loan Impact My Credit Score?
Some types of emergency loans can affect your credit score, while others will not. Whether one does or not depends on if it shows up on your credit report with Equifax, TransUnion, or Experian.
If a lender doesn’t report your account to the credit bureaus, the loan won’t influence your credit score—unless you default and a collection agency adds the bad debt to your credit reports at a later date. However, if a lender does share your account details with the credit bureaus, that’s a different story.
Banks, credit unions, and online lenders commonly report account details to the credit bureaus. Payday lenders and title lenders generally do not.
When a lender reports an emergency loan to the credit bureaus, the way you manage the account dictates whether it will help or hurt your credit score. If you make your payments on time, the account may benefit your credit score in the long run. However, if you make late payments or become past due on your debt, that emergency loan could hurt your credit score instead.
How Should You Choose an Emergency Loan?
When a lender receives a loan application, it generally starts the consideration process with some research. By checking your credit report and score, the lender can weigh the risk of taking you on as a customer.
Likewise, you should do your own homework anytime you’re thinking about taking on new debt. You should always review the pros and cons of any financing option before you borrow money—even in an emergency.
Before you choose a bad-credit emergency loan, here are some important questions to ask:
- Can I afford a new monthly payment?
- Does this lender offer loans to borrowers with bad credit?
- What does the lender charge for emergency loans (APR range)?
- Are there additional fees I should be aware of?
- How long will I have to repay the loan?
- Is there a prequalification option to check my potential rate and loan offer in advance?
- How soon will I receive the funds if I qualify?
Repeat the questions above as you research multiple emergency loan options. Even when you’re in a rush, it’s best to compare several lenders to make sure you’re getting the best deal for your situation.
How Fast Can I Get an Emergency Loan?
When you need an emergency loan, you usually must access cash in a hurry. Thankfully, there are numerous lenders that offer fast funding to qualified borrowers. Some personal loan lenders may even deposit the funds into your bank account the same day you’re approved for financing.
On the other hand, loan funding can sometimes take several days or even up to a few weeks. Certain lenders may take longer to process your loan application or release your funds than others. There’s also a chance that your personal bank or credit union may hold the funds a lender deposits into your account for a few days before you can access the money.
How Can You Prepare for an Emergency Expense?
A 2020 Federal Reserve study revealed that more than 25% of adults don’t have the cash to cover a $400 emergency expense, so if you currently don’t have money set aside to handle unexpected expenses, you’re far from alone.9 Creating an emergency fund now is the best way to prepare for surprise expenses in the future. The following five tips can help you get started.
- Track your spending – Challenge yourself to record every dollar you spend for a month, including small cash purchases.
- Create a realistic budget based on your monthly bills and spending habits – You can use convenient budgeting software or even a simple pen and paper to get the job done.
- Find ways to cut your current expenses – As you free up extra cash in your budget, you can use it to pay down debt (creating even more opportunities for savings) and to save.
- Open a separate, dedicated savings account to tuck away money for emergencies – High-yield savings accounts can help your money grow faster.
- Make a habit of saving some money every pay period – Remember, it’s fine if you need to start small.
Are There Alternatives to Emergency Loans?
Emergency loans can offer much-needed relief in certain situations, yet taking on more debt might not be the best solution if you’re already struggling financially. Before filling out a new loan application, examine your budget to ensure you can afford the monthly payments. If an additional debt is going to overextend you financially, an alternative approach might be a better choice.
A couple of alternatives to emergency loans include negotiating hardship payment plans with your creditors or asking your employer for a paycheck advance. If these options don’t work for you, then you could possibly get a cash advance from your credit card issuer (use caution as these are expensive) or a payday alternative loan (PAL) of $200 to $1,000 from a credit union. PALs may be a good option as they must be repaid within one to six months and the APRs can’t exceed 28%.
Although you may be tempted to get a payday loan when you’re facing an emergency, use extreme caution before resorting to this funding option. Not only is this type of loan very expensive but you might end up getting stuck in a payday borrowing cycle that’s difficult to escape.
The Bottom Line
Facing an emergency expense without the funds to cover it can be a stressful experience. If you have bad credit, which makes borrowing money more difficult and more expensive, you may feel even more hopeless. The best thing you can do in this situation is to take a deep breath and consider the options that are available to you.
If you decide to borrow money, compare multiple emergency loan offers to make sure you find the best solution for your situation. Then, once you recover, make a plan to put yourself in a better position in the future. You can work to build an emergency fund (slowly, if necessary) and improve your credit. Both of these moves can help you the next time unexpected expenses strike.
We evaluated more than 50 lenders and collected over 25 data points for each one before settling on our list of the best emergency loans for bad credit. While we considered many factors, some of the most important were the rates and fees (APRs), loan amounts, repayment terms, and overall loan process provided by each lender. Plus, the reputations of each lender included on our list were evaluated by reviewing a wide variety of sources.
All of the emergency loans for bad credit that made it on our list were from reputable lenders who offered transparent rates, fees, and terms. Plus, they all let you easily apply online.