Emergency loans are designed to help you out when disaster strikes and you need a helping hand to get cash in a hurry.
We’ve all been there – your washing machine stops working. Your boiler gives up and floods the house. Your car breaks down and leaves you with no way of getting to work, doing the shopping or picking the kids up from school. You had no way of knowing that this was going to happen, but now you’re faced with a large bill to get everything up and running again. When things are already a little tight, this is the last thing you need.
Luckily, beyond your bank and credit cards, there are several ways of getting the help and cash you need to get you out of a sticky situation.
Emergency Loans Option 1: Friends and family
Friends and family are often the first port of call when you need an emergency loan, and for very good reasons. First of all, they are often willing to do all they can to help, not only in terms of lending you money, but in terms of being understanding with repayments. Quite often, family and friends are happy to wait until you’re back on your feet to ask for repayments, and even then are very understanding about what you can afford.
However, bear in mind that borrowing from friends and family may mean that they dip into their own emergency fund – so don’t be offended or upset if they say that they can’t afford it. There are plenty of other options:
Emergency Loans Option 2: Peer to Peer (P2P) Lending
Much like borrowing from a friend, you can also now get an emergency loan from strangers online. Peer to Peer Lending sites have been designed to create a marketplace that allows you to borrow from individuals that are willing to lend you the money you need and that – in many cases – offer much better repayment terms than you’d get from a bank.
However, beware: P2P lending is still a relatively new method of lending and borrowing money and is still not as closely regulated by the FCA. However, all in all, borrowing from P2P sites comes with the same risks that you’d get from a bank loan – but often with lower rates for those with a good credit history.
Emergency Loans Option 3: Payday Loan
Many people with a credit rating or income that aren’t good enough to qualify for a traditional loan turn to payday loans to help them out of sticky situations. However, this is an incredibly risky move and you should be aware of the risks before you apply.
Although payday loans can seem like a short term solution when you need an emergency loan – they often only end up making your situation worse in the long run. Borrowing money on a short term basis – with an incredibly high APR – makes it far more likely that you’ll be short of money again the next month (after repaying the amount borrowed and inordinate amount of interest) and have to turn to a payday loan again. Pretty soon, you’re caught in a cycle of dependency on payday loans – which can be very expensive in the long run.
Emergency Loans Option 4: Unsecured Personal Loan
An unsecured emergency loan of up to £5,000 can often be approved, processed and in your bank account within 24 hours. Better yet, these companies perform a soft search on your credit history – which means that no mark is left on your credit file if you’re rejected, and other companies will not be able to see that you applied for a loan.
Using a guarantor to improve your chances
Having a guarantor (anybody over the age of 21, who has a regular income and can afford to make the loan repayments on your behalf, if you cannot) when you apply for a loan can significantly increase your chances of being accepted, even if your credit rating isn’t very good.
In the eyes of the lender, you become a much safer option with a guarantor, who will cover your repayments if you are not able to pay.
If you’d like to find out more information about guarantor loans and how they can help you out in an emergency while also building your credit score, why not take a look at our introduction to guarantor loans.