Different Options for Emergency Loans
Most of us find ourselves in a situation every once in a while where we need some money fast. This could be a private thing, a short term project, a business emergency, and so on. Usually, these loans are designed for short term situations where an unexpected cash flow problem has arisen. Hence, people look for short term emergency loans to cover this.
What Is an Emergency Loan?
Emergency loans are short term loans that are paid out quickly and paid back quickly as well. In most cases, these are high interest rates loans, because they run over such a short period of time. There are different options out there if you are looking for this type of loan.
photo via Flickr stockmonkeys.com
1 – Bank Financing
If you have a reasonably good credit rating, you may want to choose a bank loan or go to a credit union. You could get a home equity loan or an overdraft and so on. However, it often takes a long time to get approval for these types of loan, and they can be hard to obtain if your credit rating is less than perfect.
2 – Short Term Financing
This is a really good option if you can find a credible lender. You need to make a clear agreement, however, that shows how much you agree to borrow, how you will pay it back and how much interest you will pay. Usually, you can turn to flexible “boutique” lenders for this type of financing. It is more suitable for businesses, however, and the loan amounts tend to be very high, ranging upwards from $10,000 to several million.
3 – Credit Card Financing
You could decide to charge your expenses to a new credit card, if you are able to find one. The problem with credit cards is that you generally get quite a low amount of credit when you first apply for them, particularly if you have a poor credit rating. Additionally, it could be all too tempting to only make the minimum payment, which means you end up with a lot of credit for a long time, rather than actually being debt free reasonably quickly.
4 – Private Financing
This is where you simply borrow money from someone you know. This is a great option if you want to keep things affordable, as your friends may only charge you very low interest rates, if any at all. However, if you do not make repayments, you may risk a good friendship and this option can be very difficult. This is why it is generally recommended to make a legally binding contract, so that your friend knows that they are not taking any risks.
6 – Save Up
A final option is to simply save up. In an ideal world, you should have enough savings to cover a true financial emergency. Or, if you haven’t, you should be able to put off spending until you have saved up. In reality, however, this is often impossible to do.
Guest Author: Lolita Di
Photo courtesy of StockMonkeys
