Can You Get An Emergency Loan With Bad Credit?

Emergency loans aren’t hard to find. A quick online search turns up dozens of companies willing to lend money on short notice. And if you have good credit, it’s easy to get approved for a personal loan and receive your money quickly. 

Unfortunately, it's not quite as straightforward when you have a lower credit score. You're not without options, however. Let's take a look at the types of emergency loans you can find with bad credit.

Types of emergency loans for bad credit

The types of emergency loans you can get with bad credit will depend on your other qualifications and assets, as well as whether you need cash or can get by with credit. Here are some of the most common options.

Personal installment loans

A personal installment loan is a loan that you repay with regular monthly payments, typically over a few years. Depending on the situation, you could get a personal loan as quickly as one business day after you apply (though it could take longer). Once it shows up as cash in your bank account, it can be used for anything.

It’s possible to qualify for a personal loan with bad credit. Specifically, you may qualify for a hardship personal loan if you're experiencing financial hardship due to job loss, injury, or another major life event.

The interest rate you get is based at least partly on your credit score, so bad credit will mean a higher cost and perhaps more fees. That said, a personal loan is still probably one of the least expensive ways to get an emergency loan.

Credit cards

You may already have a credit card that you can use to cover an emergency expense, then pay off over time. This isn't ideal, since credit cards are often the most expensive way to borrow. But it could be less expensive than other emergency funding options like payday loans.

Friend and family loans

In a real emergency, friends or family may be willing to help you out of your tough spot. This isn't a method you should use often, but it may be your most affordable option if you have bad credit.

You can find basic loan documents online if you want to formalize the agreement or repayment plan. You may even wish to offer an asset or personal belonging as collateral for the loan so your friend or family member knows you're serious about repaying the debt.

Cash advance apps

A few fintech companies have mobile apps that offer small paycheck cash advances. This may be an option if you need a low amount ($500 or less) for a short time as a one-time emergency loan.

Many of these apps say they charge low or no interest fees on the loan. However, you may need to pay a monthly account or user fee, as well as fees for expedited advances in an emergency. Cash advance apps are also known to use pressure tactics to get you to offer "tips" or other "voluntary" payments.

Indeed, the Center for Responsible Lending found that most users end up paying fees and "tips" equal to an average APR over 330%.

You'll typically need to either set up a checking account with the platform and direct deposit your paycheck into that account or give them access to your existing checking account where your paycheck is currently deposited. The money you borrow—plus any fee or finance charge—is automatically taken out of your bank account on your next payday.

Title loans

Title loans are very expensive short-term secured loans guaranteed by your car, truck, motorcycle, or other vehicle. A typical title loan has to be repaid in 15 to 30 days and may let you borrow up to half the value of your vehicle.

Before you think it sounds too good to be true, it is: Title loan lenders charge up to 25% of the amount borrowed in finance fees—per month. That works out to an APR of about 300%. The lender may charge extra fees, too, like origination, application, and document fees.

For context, even the most expensive credit cards have an APR below 40%.

Getting a title loan generally requires you to:

• Own the vehicle outright.

• Give the physical title to the lender. (You don't get the title back until you pay off the entire loan—and all the fees.)

• Bring the vehicle to the lender so the lender can assess its value.

• Provide a photo ID and proof of insurance.

• Allow the lender to put a GPS tracker on the vehicle.

Here’s how a title loan typically works: 

• You borrow $2,000 against your $8,000 car and give the lender your title. 

• In 30 days, you owe $2,500 plus any other fees the lender charges. 

• Ideally, you pay the loan and fees in full and get your title back. 

• If you can’t repay the loan in 30 days, you may be allowed to roll it over—extend the loan for another 30 days—for an additional fee plus an extra 30 days' worth of finance charges.

• In 60 days, you'll owe the original $2,500, plus at least $500 in extra fees.

• If you can't pay the full amount owed and can't roll it over again, the lender can repossess the vehicle and sell it.

Should you default (not repay as agreed) on the loan, the lender owns your vehicle. It can sell the vehicle and keep all of the money, even if the car sells for more than what you owed.

Payday loans

Payday loans are another form of very expensive short-term funding. They generally have terms of two to four weeks (based on a typical pay period, hence the name payday loan). 

Unlike title loans, payday loans are unsecured, meaning there is no collateral. As such, you won't get a lot of money; most payday loans cap out at $500 or less.  

While smaller than title loans, payday loans can be just as or even more expensive to use. Expect to pay $10 to $30 for every $100 borrowed. In terms of interest fees, $15 to borrow $100 for two weeks would work out to an APR of 391%.

For a standard payday loan, you'll write the lender a personal check for the amount you want to borrow plus loan fees. Alternatively, you'll authorize an electronic transfer of that amount from your bank account. If you don’t repay the loan on time, the lender can cash the check or debit your account.

Alternatively, your lender may let you renew the loan if you can't pay it back on time—for another finance fee. For example, if you pay $30 to borrow $200, you owe $230 after two weeks. If you roll it over, you'll owe $260 after four weeks, $290 after six weeks, and so on. 

Home equity loans and lines of credit

If you don’t need the cash today and you own your own home, a home equity loan or home equity line of credit (HELOC) could be an option. A home equity loan uses your home's equity (the home's value over the amount you owe on your mortgage) as security, or collateral, for a loan or credit line.

For example, say your home is worth $300,000 and you have $150,000 remaining on your mortgage loan. You have $150,000 worth of equity in your home that can be used as collateral for a home equity loan. Most lenders won’t let you borrow the entire amount.

The fastest home equity loans can take five to seven days to close and fund—and they more often take around a month—so this isn't the quickest source of emergency cash. However, since home equity loans are guaranteed by your home, it may be easier to qualify for a HELOC with bad credit than other types of funding. The interest rates could also be more competitive.

Make sure you can honor the repayment terms. Your home is the collateral for the loan. If you don’t repay the loan, you could lose your home.

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Minimum credit score for a bad credit emergency loan

The minimum credit score you need for an emergency loan will depend on the type of loan. Some emergency loans may not even require a credit check at all.

Don't assume you need to look specifically for no-credit-check loans, however. A FICO® Score of 600 or more could be enough to qualify you for a personal installment loan that will be more affordable than a title or payday loan.

Credit score isn’t the only factor lenders consider. Your ability to repay the loan is key, so they’ll also analyze your debt-to-income ratio, or DTI. Your DTI equals your total monthly housing and debt payments divided by your gross (before tax) income. Ideally, your DTI (including the new loan that you want) is under 36%. But don’t worry if it isn’t. Many lenders approve borrowers with a 50% or higher DTI. 

Getting approved for a better emergency loan

While most people can apply for a payday or title loan and have money in hours, those are loans of last resort. They are famous for trapping borrowers in a cycle of rollovers and increasing balances. 

In fact, the Center for Responsible Lending says that only 1% of payday loans are one-time loans paid in full without extensions. The rest take out and renew loans multiple times a year, racking up large finance charges.

So while it may make sense to take out a payday loan to save your job or a pet’s life, you should try to get a better loan if possible. These options may help you get better terms:

• Get a secured loan. Secured loans use your assets as collateral. They're generally easier to get and have better terms than unsecured loans when you have bad credit.

• Get a loan with a co-borrower who has better income or credit than you do. The lender examines both of your credit histories, debts, and income. A co-borrower gets equal access to the borrowed money.

• Enlist a co-signer. Co-signers are on the hook to repay the loan if you default (don’t repay). So it’s a big ask. A co-signer has financial responsibility but doesn’t get access to the borrowed money.

Handle your loan extra carefully if you get it with a co-borrower or co-signer. If you miss a payment, the lender will likely report this to the credit bureaus. It’ll hurt your credit score and theirs. Plus, they’ll be on the hook financially.

Paying back an emergency loan

It can be hard to look past the immediate danger an emergency presents. However, you need to consider how you’ll pay back your loan before getting it. Think about these points:

• The longer you take to repay the loan, the more you’ll pay in interest. But a longer term could help you get a more affordable payment. 

• Compare interest rates and terms when choosing an emergency loan, and use a loan calculator to see what the payments look like. 

• Interest fees may not be the only cost. Make sure to add origination fees, finance charges, and other costs to your calculation.

• What can you give up to save money until you pay off your loan?

• What can you sell to pay off your loan once the emergency has passed?

• How can you boost your income until you pay off the loan? 

Alternatives to emergency loans for bad credit

An expensive emergency loan may not be your only option. Consider some of these potential alternatives:

• Government aid. You may qualify for federal or local government aid depending on the nature of your emergency.

• Employer paycheck advance. See if your employer will give you an advance on your next paycheck to cover an emergency expense.

• Sell something you don’t need. Sites like eBay, Craigslist, or Facebook Marketplace can help you sell gently-used clothing or electronics.

• Contact a charity or nonprofit. Your local area may have food banks or other nonprofits that can help you out in a pinch. Consider Habitat for Humanity and HUD for home repairs and the SPCA or Humane Society for pet-related aid.

• Peer-to-peer funding. Peer-to-peer (P2P) loans are personal loans funded by a group of individuals and can have flexible requirements, though they may be expensive.

• Fundraise through crowdsourcing. Start a GoFundMe or similar crowdsourced fund.

Emergencies can come out of nowhere and cause you to panic, especially if you have bad credit. Take a breath and work through your options. Avoiding a cycle of costly loans and increasing balances could help you get back on firmer financial footing and be better prepared to handle life’s next curve ball.