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An emergency loan is a good option for people with poor credit who need money fast and don’t want to turn to payday or car title loans. Rates and fees are generally better, and borrowers can now choose from many lenders to find the best deal.
What is an emergency loan?
An emergency loan is a personal loan intended to cover large or unexpected expenses. Most lenders allow almost all types of emergency use. When selecting an emergency loan lender, it is essential to carefully consider rates, terms and fees to keep borrowing as affordable as possible.
What are the best emergency lenders for people with bad credit?
Borrowing with bad credit is never cheap, but each of the following lenders offers something that borrowers with bad credit may find beneficial.
1. SeedFi
- Ideal for borrowing free of charge
- APR between 7.42% and 29.99%
Insight
Except for the late fees, SeedFi has no setup fees or other charges. Late fees are put into the borrower’s savings account, which is included with the loan. Late fees accrue to the borrower after depositing in a SeedFi savings account if the loan is repaid in full.
Advantages
Although an emergency loan may sometimes be necessary, it can be a slippery slope and make a bad credit situation worse. With SeedFi, the borrowed amount is split between the loan and a savings account. The savings account serves as collateral. Once the loan is repaid in full, the borrower receives the money in the savings account.
SeedFi reports payouts to all three major credit bureausallowing responsible borrowers to rebuild their credit.
The inconvenients
Because part of the loan is paid into a savings account that cannot be accessed until the emergency loan is repaid, some borrowers may not get enough of what they borrowed to meet their emergency needs. Payment schedules are tailored to customer pay cycles. This means that money comes out of each paycheck for loan repayment.
2. Reached
- Ideal for low credit borrowers
- APR between 3.09% and 35.99%
Insight
Upstart’s minimum credit score requirement is only 300. Borrowers may need to meet other qualifications. Upstart also considers those with insufficient credit.
Advantages
Upstart considers educational background and earning potential. This can help young borrowers who have little credit but higher earning potential.
The inconvenients
Upstart considers that the candidate debt to income ratio, which may make some potential borrowers ineligible. Borrowers cannot have gone bankrupt within the last 12 months. Borrowers must be employed or have full-time employment commencing within six months or another source of income to qualify.
3. Upgrade
- Ideal for long repayment terms
- APR between 5.94% and 35.97%
Insight
The upgrade is ideal for those who need to borrow a larger amount and will require longer repayment terms. Some borrowers can qualify for a loan of up to $50,000 and a loan term of up to 84 months.
Advantages
Borrowers who are ineligible for an upgrade emergency loan may qualify for a secured emergency loan through automatic cash refinancing. An automatic cash refinance can help some borrowers get a better rate than an unsecured emergency loan.
The inconvenients
To get the lowest rates, borrowers must sign up for autopay. Some may be required to repay some of the existing debt directly with the emergency loan, limiting the funds available for emergency use.
The upgrade has high setup fees which vary between 2.9% and 8%.
4.OneMain Financial
- Ideal for borrowers with co-applicants
- APR between 18% and 35.99%
Insight
Very few emergency lenders allow co-applicants. This may help some borrowers qualify who might not otherwise.
Advantages
OneMain Financial offers 24, 36, 48 and 60 month terms. It also has a secured loan option.
The inconvenients
Origination fees can be high – for some borrowers they can be up to 10% of the loan amount. The maximum loan amount is $20,000.
5. Rocket Loans
- Ideal for same day funds
- APR between 5.97% and 29.99%
Insight
For borrowers who need money immediately, Rocket Loans can obtain funds for some the same day, depending on the bank receiving the funds. In most cases, funds are available within days.
Advantages
Rocket’s minimum credit score requirement is 580. Other factors will also determine eligibility. Borrowers who choose automatic payment benefit from a rate reduction.
The inconvenients
Rocket has an origination fee of 1% to 6% charged with each loan. Loan term options are limited to 36 months or 60 months.
Good to know
An origination fee is charged by the lender when processing a loan. A 10% origination fee means that the borrower only receives 90% of the amount borrowed. Borrowings should avoid high origination fees, if possible.
Final take
Emergency loans for bad credit allowed borrowers who were limited to the car title and payday loans to get the necessary money. Most borrowers with bad credit should be able to find a loan option they qualify for. They might just not be eligible enough, and the rates and fees might be high.
Borrowers should carefully compare options to find the best possible loan terms and rates. Secured loan options and signing up for autopay can help some borrowers get a better rate.
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