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 money quickly. 

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 available for borrowers with bad credit.

Emergency Loan Requirements and Eligibility 

The requirements for any given loan vary based on the lender and loan type. That said, there are some basic and common requirements that most lenders share.

Basic requirements for a loan

At minimum, you need to meet these basic requirements to qualify for nearly any loan:

• You must be at least 18 years old.

• You must have employment, or some other form of income.

• You must have an active bank account in good standing.

• You must have government-issued identification, such as a state ID or driver's license.

Be prepared to provide proof (documentation) that you meet these qualifications during the application process. Having your documents at the ready helps everything go as fast as possible.

Common eligibility criteria for emergency loans

Most lenders consider these factors when looking at your application. The specific requirements (and how much emphasis gets put on each category) vary a lot by lender and loan.

Credit history

Your credit score is an easy way to estimate your creditworthiness, but lenders don't stop there. They also pull your full credit report from at least one credit bureau to look at your complete credit history.

Lenders prefer to see a credit history free from late or missed payments or defaulted accounts. They also tend to prefer longer credit histories that show you've managed credit over years.

Debt-to-income ratio

Your debt-to-income ratio (DTI) is a measurement of how much debt you have compared to your income. Specifically, it is the total of your monthly debt payments (including housing, credit cards, and loans) divided by your gross income. (Gross income is your pre-tax income.)

For example, if you earn $5,000 a month and spend $2,000 of that on rent and debt payments, your DTI is 40%

$2,000 / $5,000 = 0.4 (40%)

Each lender has its own rules for DTI limits, but it’s typically easier to get approved if your DTI is below 50%. A higher DTI can make getting a loan more difficult, though not impossible.

Income and employment status

Lenders need to know you can repay your loan, so they want details about your source of income. This includes your current employer and monthly income. It may also include employment history. A stable job history with a consistent or increasing income level shows you have a reliable source of income. This could help improve your eligibility for an emergency loan.

Collateral or security

The lender is looking for assurance that they’ll be repaid. One way to offer that assurance is with collateral, or something valuable that you own and offer as a guarantee. For example, your car is the collateral for your car loan. 

Loans guaranteed by collateral, or secured loans, can be easier to get with poor credit since the risk is lower for the lender. If you don’t repay the loan, the lender has the right to sell the collateral to recover the money you owe. 

Loan amount and down payment

The amount of money you ask for definitely impacts the lender's approval decision. The larger the loan, the more money the lender has to risk. A low credit score applicant is already considered high risk, so asking for a large loan can compound that risk, leading to a denial.

In other words, if you have lower credit, a smaller loan is probably going to be easier to get approved for than a larger loan. If you're struggling to get a loan, consider asking for a smaller amount.

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Types of Emergency Loans for Bad Credit

The types of emergency loans you can get with bad credit 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 is based at least partly on your credit score, so bad credit could mean a higher cost and perhaps more fees. That said, a personal loan is among the least expensive ways to get an emergency loan.

Credit cards

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

Friend and family loans

In an 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 an 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. It can also go a long way toward reassuring your friend or family member if you already have a plan in place for repaying the loan.

Cash advance apps

A few 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, particularly as a one-time emergency loan.

Many of these apps say they charge low or no interest fees on the loan. However, you might pay a monthly account or user fee, as well as fees for same-day cash in an emergency. Cash advance apps may also use pressure tactics to get you to offer tips or other voluntary payments. The Center for Responsible Lending found that most users end up paying fees and tips equal to an average APR over 330%.

You typically need to either set up a checking account with the platform and direct deposit your paycheck into that account, or give access to an 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 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 offer up to half the value of your vehicle.

If 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, such as origination, application, and document fees.

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

Getting a title loan generally requires that you:

• 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 extend it for another 30 days—for an additional fee, plus an extra 30 days' worth of finance charges.

• In 60 days, you’d 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 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 a result, 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. 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 write the lender a personal check for the amount you want to borrow, plus loan fees. Alternatively, you 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 might owe $230 after two weeks. If you roll it over, your balance could go up to $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 is a mortgage. Your home guarantees the loan. 

For example, say your home is worth $300,000 and you have $150,000 remaining on your mortgage loan—you have $150,000 of equity. Most lenders won’t let you borrow the entire equity amount, but depending on the lender’s limits and your own financial situation, you might be able to apply for an $80,000 to $100,000 loan.

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, because your home is the collateral for the loan. If you don’t repay the loan, you could lose your home.

Minimum Credit Score for a Bad Credit Emergency Loan

The minimum credit score you need for an emergency loan depends on the type of loan. Some emergency loans may not 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 loan that’s much 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 also analyze your debt-to-income ratio, or DTI. Your DTI is your total monthly housing and debt payments divided by your 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. 

How to Apply for an Emergency Loan with Bad Credit 

The specific steps you need to follow to apply for a loan vary a bit based on the type of loan and the lender. However, most loans follow the same basic pattern:

• Check your credit reports. You need to know where you stand, so you can understand your qualifications. You can check your credit reports once per week for free at AnnualCreditReport.com. 

• Research lenders. The lender you choose will dictate not only whether you get approved, but also what kind of loan terms you're offered. Local credit unions and online-only banks can often provide the most flexible credit terms.

• Gather your documents. You typically need your ID, as well as a few pay stubs and/or bank statements to show your income.

• Pre-qualify to check rates. Many lenders let you pre-qualify for a loan, a process which uses a soft credit pull to give you an idea of what terms to expect. A soft credit pull doesn't hurt your credit score.

• Fill out the application. Once you've chosen a lender, fill out the full application. (This is when the lender will use a hard credit inquiry to check your credit report.)

• Review the loan agreement. Make sure the terms are clear, and what you expected.

• Finalize the loan. If everything looks right, you agree to the terms and finalize the loan. You should get your money shortly thereafter.

Even when speed is of the essence, it's important to remember all the steps in applying for a loan—including the research and preparation stages. These could help you avoid costly mistakes.

How long from loan application to funding?

How long it takes for you to receive your funds can vary based on a lot of factors, including the type of loan and the individual lender. Many emergency loans pay out as soon as one business day, while others may take several days for approval.

You can help the process go as quickly as possible by being prepared. This includes submitting all the necessary documents as part of your application. It can drag the process out if the lender needs to contact you for more information.

Getting Approved for a Better Emergency Loan

While most people can apply for a payday or title loan and have money in hours, these loans are famous for trapping borrowers in a cycle of rollovers and increasing balances. That’s why they’re considered loans of last resort.

In fact, the Center for Responsible Lending says that only 1% of payday loans are one-time loans paid in full, without extensions. That means most people have to take out or renew payday 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 steps may help you get better terms:

• Choose your lender carefully. Community banks and credit unions may be more flexible than bigger banks and lenders. Online-only banks can also offer lower rates than brick-and-mortar banks.

• Use your established banking relationships. You may get a better deal from a bank you're already on good terms with, such as the bank you use for checking or savings accounts.

• Get a secured loan. Secured loans use something you own 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 cosigner. Cosigners are on the hook to repay the loan if you don’t repay it. So it’s a big ask. A cosigner has financial responsibility, but doesn’t get access to the borrowed money.

• Make it work with a smaller loan. A smaller loan means less risk for the lender, so approval requirements may be more flexible.

Handle your loan extra carefully if you get it with a co-borrower or cosigner. If you miss a payment, the lender will likely report this to the credit bureaus, hurting both people’s credit scores. Plus, they’ll be on the hook financially.

Common Loan Terms and What They Mean

Jargon can get confusing. Here are some common loan terms to know:

• APR: Short for "annual percentage rate." This is the yearly cost of a loan, including fees (but not compound interest). APR is used to compare costs across financial products.

• Finance charge: Some lenders charge flat finance charges or finance fees instead of a percentage-based interest fee.

• Origination fee: This is a fee meant to cover the lender's cost to set up your loan. Many, but not all, installment loans have an origination fee.

• Secured vs. unsecured loan: A loan requiring a down payment or other asset as collateral is a secured loan. If you don't need to provide any type of security, the loan is unsecured.

• Collateral: A valuable asset you agree to give to the lender if you default on (stop repaying) your loan. Cash, real estate, and vehicles are commonly used for collateral.

• Co-borrower vs. cosigner: A co-borrower is someone who applies for the loan with you as a partner. You can each access and use the loan money. A cosigner doesn't typically use the loan funds. Instead, they are like human collateral; the cosigner agrees to be financially responsible for the loan if you don’t pay.

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 you get it. Think about these points:

• The longer you take to repay the loan, the more you 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 could you give up to save money until you pay off your loan?

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

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

Red Flags to Avoid with Emergency Lenders

Needing a loan when you have bad credit can be stressful, a feeling that can be compounded when you're in an emergency situation. This can make it easy to overlook warning signs you might otherwise spot.

Here's a few tips for what to avoid when looking for a lender:

• Outrageous fees. Predatory lenders take advantage of desperate people by charging fees and finance charges equivalent to a three-figure APR. Compare your options carefully to avoid overpaying.

• No credit check. While this may seem like just what you want, the opposite is often true. Lenders that don't check your credit will assume the worst—and charge you for it in interest and fees.

• Lack of transparency. The terms and repayment details should be clearly presented, with no hidden fees.

• No customer support or contact information. Every legitimate business should make it easy to contact a human for help and troubleshooting. Phone or in-person service is best.

• A bad reputation (or none at all). Do a quick check to see what people say in reviews and on social media. Watch out for companies with a lot of customer complaints.

• Pressure tactics or bullying. No legitimate lender pressures you into a loan agreement. Avoid companies that badger you or don't take "no" for an answer.

Emergency Loans vs. Other Quick Cash Options

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, electronics, or other valuables.

• 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.

Here's a quick comparison of emergency funding options:

Note that the fees and interest rate a lender can charge for a specific financial product may be different depending on where the lender is headquartered and your state of residence.

Be Proactive: Build an Emergency Fund Before You Need It

Emergencies can come out of nowhere and cause people to panic, especially if they have bad credit. If you feel panicked, take a breath and work through your options, then just do your best. 

Once this emergency is behind you, consider preparing for the next emergency before it happens by starting an emergency fund. Tapping into your emergency fund instead of a high-interest emergency loan could save you thousands in interest fees.