There comes a time in our lives when we need fast cash; you’re facing an emergency and you need the financial means to get you out of it. Let’s say you just had an accident and need to repair your car, or you need money for your upcoming wedding, vacation, or home renovations. This is where personal loans come in handy; they can help you take care of any large expenses you need to pay off or help you recover from a financial crisis. Below is a quick guide on how you can get yourself a personal loan during a financial emergency.
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Types of loans for an emergency
Luckily, there are many types of personal loans you can get to help you out of an emergency. Consider the following if you don’t have enough savings:
Unsecured Personal Loans
The benefit of personal loans is that they’re unsecured, meaning that the bank or lender won’t need to secure your assets as collateral to guarantee you pay off what you borrowed. This provides you the flexibility of getting a loan for any financial issue in no time. According to Moneyarcher.com, you can get a fast loan for your emergency on the same day or even with a maximum period of 24-48 hours. They’re quick and are also known as installment loans because you’re granted a small or large sum of money at a fixed interest rate and you’re required to pay it back with monthly installments for a certain period of time.
A personal credit line loan
This type is often referred to as a ‘revolver’ loan because you can withdraw the amount of cash you need any time you want from your credit card balance. The credit card company or your bank will add an interest rate according to the amount you withdrew as well as the duration. You don’t need to pay them in installments, but you will return them like credit card payments with a minimum amount due.
A balance transfer
This type of loan requires you to transfer any loans you were already granted into one place, you can also consolidate them at a low-interest rate. Also known as a Debt Consolidation Plan, it allows you to manage all your loans as one instead of multiple ones. You repay it with monthly installments as well.
Pros and cons of a personal loan
Personal loans can have endless advantages in terms of building your credit portfolio, for example. They can build it in a short amount of time and can increase your credit limit. They’re also fast to process so you won’t spend too much time providing endless documentation. Lastly, they’re flexible because you’re not required to use them for a certain goal; they can be used for anything, including your financial emergency.
On the other hand, personal loans can cause you a number of disadvantages as well. They can cause you to be in debt, furthering your financial mess even more. They also have a high-interest rate, even if they’re fixed. If you fall into debt or you’re unable to pay off a monthly installment, it will forever remain in your credit history by giving you bad credit. Be sure you can pay off the loan during the set time period to avoid any penalties or debts from happening.
Are you eligible to apply?
Applying for a personal loan is a fairly easy process. It may require less documentation, but you still need to prove your ability to pay your loan off by providing proof of employment and salary slips. The lenders will also check your credit history. It’s always a plus if you have a good credit score because it will give you a low-interest rate. If your credit score is bad, it doesn’t mean you’ll get rejected, but they will raise the interest rate. If they’re satisfied overall with your final report, then they will grant your loan in no time.
Even though emergencies can be quite surprising, it’s always better if you plan for possible ones ahead of time. Be sure to have savings and check out all the other alternatives, like borrowing from friends and family, before you take out a loan. If you feel a personal loan is right for you, consider all the above-mentioned factors, so you won’t create a second financial emergency.
