5 types of emergency loans and their uses
3. Credit card cash advances
Credit cards can be useful tools in an emergency when used responsibly. Many credit cards offer a cash advance feature that may allow you to access cash from an ATM or bank branch in a crunch. Since the cash advance is tied to your existing card’s credit limit, it doesn’t require an additional credit check.
While credit card cash advances may be a quick and easy funding choice, they typically have higher interest rates than your card’s standard variable APR. Plus, interest will also start to accrue right away on a cash advance, since there often isn’t a grace period.
Who credit card advances are better for
Those with active credit cards in good standing who need a quick small loan and who can afford the added fees and interest charges — or can realistically make a speedy repayment — will be the best fit for this type of emergency cash.
Pros
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Ability to avoid overdraft fees
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Low or no fees
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Useful app-based tools
Cons
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Not a long-term solution for financial distress
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Fine print can be difficult to parse
4. Payday loans
A payday loan is a type of instant, no-credit-check loan that lets you borrow up to about $500. Payday loans typically have to be repaid within two weeks or on your next payday.
This kind of emergency loan is generally considered extremely risky because standard payday lender APRs are about 400 percent, according to the Consumer Financial Protection Bureau. And they can be even higher. The short repayment period combined with high fees often makes it hard for people to repay what’s owed by the due date — and to escape a potential debt cycle.
Who payday loans are better for
Payday loans are the best fit for those with poor credit who can’t qualify for any other type of emergency loan and can pay the entire balance off before their next paycheck.
Pros
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Funds are accessible from any ATM
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Cash advance option may not require any application
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No credit check required for most advances
Cons
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Interest begins accruing immediately
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High rates and fees
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Limited borrowing amounts
5. Title loans
A title loan is another type of emergency loan that gets you fast access to cash secured by equity in your car. Also called a “pink slip loan,” this option allows you to borrow against 25 to 50 percent of the current market value of your vehicle.
Unlike some other emergency loan options, title loans are secured and require you to use your car for collateral. If you can’t repay the balance by the end of your loan term, the lender can seize your vehicle as repayment. That’s why it’s another last-resort option that’s best avoided, if possible.
Who title loans are better for
Title loans may be the only option for borrowers with poor credit but who own a free-and-clear vehicle. They should be a last resort in a dire situation, especially since you risk losing a source of transportation if you can’t pay the loan back.
Pros
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No credit check necessary
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Fast funding
Cons
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Extremely high APRs
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Very short repayment period
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Not a long-term solution
What can emergency loans be used for?
You can use an emergency loan for just about any unexpected expense you don’t have the cash to pay for. However, there are some urgent common scenarios that lead consumers to apply for an emergency loan.
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Car repairs. Significant repairs like an engine or bumper replacement can cost anywhere from a few hundred dollars to $10,000.
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Medical expenses. Even with health insurance coverage, the average U.S. employee has high deductibles: $2,085 for individuals, $4,063 for families, according to Kaiser Family Foundation. If the provider doesn’t offer any payment plans and demands immediate repayment, an emergency loan can help you avoid collection actions.
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Home repairs. The average household spent $978 on emergency home repairs in 2024, according to Angi’s 2024 State of Home Spending Report.
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Funeral costs. If an emergency loan is your only option to pay for a funeral, consider jointly applying for the loan with siblings or heirs, so the responsibility for the loan doesn’t fall only on you.
How to pick the right type of emergency loan
The right emergency loan for you depends on a number of factors, including how quickly you need the money and how much you need to borrow. If none of theseoptions fit, you may want to consider some alternatives to emergency loans before making your next move.
|
Emergency loan type |
Better for |
A good fit for this type of emergency bill |
|---|---|---|
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Personal loan |
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Credit card cash advance |
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Payday loans |
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Title loans |
|
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Can I get an emergency loan with a low income?
Yes, it is possible to get an emergency loan with a low income. If you have a good or better credit score, you may qualify for a smaller personal loan even with low income. Payday and title loans cater to low-income borrowers, as well, but often trap borrowers in an exploitative cycle of debt.
Bottom line
Most experts recommend an emergency fund with three to six months of expenses to avoid needing to finance an unforeseen expense. To avoid paying extra interest on loans for emergency bills, do your best to stash extra cash to build up your savings. (You might trim unnecessary expenses in your budget or pick up a side hustle to boost your income.)
If you must borrow in an urgent situation, keeping your credit in tip-top shape can help you get the lowest rates at the best terms.
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