Less than half of Americans have enough savings to cover a $1000 emergency. Dealing with an unexpected bill for yourself is bad enough. Moreover, if you’re a parent and you’re faced with an emergency for one of your kids, you’re going to be in a tight spot.
To be prepared for any emergency, there are various money-saving hacks for parents to try. But till you’ve saved enough to cover a major financial shortfall, you may have to count on certain lending options.
So, let’s look at 5 emergency loan options if you’ve got bad credit and need money now.
1. Secured Loan
A secured loan means you’re putting up some sort of collateral as security for the loan. If you don’t repay the loan, the lender gets to keep the security.
If you have investments or other assets that you can’t quickly convert to cash but have a stable value, you may be able to use them as security for a loan.
2. Credit Union Loan
Credit unions are often more flexible than banks when it comes to lending money. If you already deal with a credit union and have been a long-time customer, they may be willing to work with you even if your credit score isn’t the best.
3. Mortgage or Line of Credit
If you own your home or other real estate and it has positive equity, you may be able to get a mortgage or a home equity line of credit. This is another type of secured loan since the equity in your home is being used as security for the mortgage.
Be careful when choosing this option though. If you can’t repay the loan for some reason, the bank or other lenders could foreclose on your property, leaving you out in the cold.
4. Title Loan
If you own a car or other vehicle, it may have enough value to qualify for a title loan. Once again, this is a specific type of secured loan that uses the value of your vehicle as security against the loan.
Keep in mind that your car could get repossessed if you aren’t able to make the loan payments. That might not be quite as serious as foreclosure but it could still present problems.
5. Payday Loan
Payday loans are one of the most common types of emergency loan options but they’re also one of the most expensive. These services loan you money based on how much you earn and charge a higher interest rate and often other fees for the privilege.
They can also have a snowball effect. When you get your next paycheck, some of it goes to pay off the loan, leaving you short. If you need to take out another payday loan to make other payments, you’ll keep facing the same problem every payday.
Be Prepared When Applying for an Emergency Loan
Whatever type of emergency loan you choose if you need cash now, make sure you’re prepared ahead of time. Before applying, check your credit report so you have an idea of how likely you are to be approved for the less risky types of emergency loans. You’ll also see if there are any mistakes in the report that could be dragging your score down.
Gather your social security number, income details, photo ID, and other important personal information. You’ll need them when you apply for any of these loans.
Finally, shop around to find the best deal. It might be an emergency, but take the time to look at a few options so you know you’re getting the best deal possible on short notice.
Photo credit: Gotcredit.com