When applying for an emergency loan with bad credit, you need to know what to expect. Emergency loans can help you cover urgent expenses, like car or home repairs. In fact, many loan lenders offer fast funding access to individuals in financially stressful situations. Still, you will have to find a loan that you can qualify for if you can’t raise your credit score fast. With a low credit score, potential borrowers need to know what to anticipate before starting the process. Here’s what to expect when applying for an emergency loan with bad credit.
When applying for an emergency loan with bad credit, there are several options with varying risks. For example, you could apply for a payday alternative loan (PAL) if you’re a member of a federal credit union. Typically, these short-term loans have a borrowing cap, meaning you can’t take out more than three PAL loans within six months. On the other hand, payday loans risk trapping you in debt. Indeed, if you can’t pay the loan back when it’s due, you need to re-borrow and roll the amount over to a new loan. Other emergency loan options for bad credit include a title loan, unsecured personal loan, or a credit card cash advance. Expect loan options with varying risks when applying for an emergency loan with bad credit.
Credit Score Limit
In addition, you will likely encounter a credit score limit when applying for an bad credit emergency loan to survive rough times. For instance, many financial institutions have a credit score limit of 500 or 600 for their emergency loans. On the other hand, some lenders allow you apply for a joint emergency loan with an even lower score. Essentially, you can get approved as long as your cosigner has better credit and meets the limit requirements. Depending on your lender, you may encounter different credit score limits as you apply for your emergency loan.
Soft Credit Check
Next, expect a soft credit check as you apply for your emergency loan with bad credit. Many financial institutions use eligibility calculators to assess your loan affordability. When filling out an online emergency loan application, your institution likely asks how much you need to borrow over how long. Once you complete the application, your potential lender conducts a soft check. This allows you to preview your rate and indicates your eligibility for bad credit loans without impacting your credit score. Financial institutions often use a soft credit check to evaluate your loan acceptance during the application process.
Higher Interest Rates
When applying for your emergency loan, your bad credit may yield higher interest rates. When credit scores are at the bottom of the scale, the lenders are taking on higher risk. As a result, they charge a higher interest rate. For example, your loan may have a 29.99% APR with a low credit score. Over a five-year term, a $10,000 loan can rack up over $9,000 in interest costs. On the other hand, you could get a 5.95% interest rate with excellent credit score financial habits. The total interest cost would be thousands of dollars less. Naturally, expect higher interest rates when applying for an emergency loan with bad credit.
Fast Decision Times
Furthermore, you can expect fast decision times when you apply for your emergency loan. Importantly, the application process will be most efficient if you complete it online. You may also get a quick personal loan for fast cash access if you apply in-person at a financial branch. With these methods, you ideally hear back within a few business days. Some lenders even get back to you with a loan approval decision the same day. If you need financial relief fast, check to see if your prospective lender offers same-day decisions. Upon approval, you can usually receive funding 1-2 business days later. When applying for an emergency loan with bad credit, expect fast decision times, especially with an online or in-person application.
There are several attributes to expect when applying for an emergency loan with bad credit. First, there are going to be different loan options to consider, each with their own risks. Next, you will likely have a credit score limit as well. As you fill out the application, expect financial institutions to conduct a soft credit check. You may also encounter higher personal loan APRs with a low credit score. Furthermore, once completed, anticipate fast decision times for your loan approval. Consider the points mentioned above to know what to expect when applying for an emergency loan with bad credit.