Ideally, everyone must have a financial safety net for unexpected situations and expenses. But that is not the case for many people. When financial emergencies come, such as a sudden medical bill, major home repair, or temporary unemployment, many don’t have enough funds to cover them.
Being in that position where you need instant funds is extremely stressful. But the good news is there are a variety of borrowing options that can help you get through such a financial dilemma. It’s essential to note, though, that some might be better than the others depending on your situation.
We’ve highlighted the following borrowing options you can take out online in case of an emergency. See which one will work best for your immediate financial needs.
Payday Loans
Payday loans are one type of short-term borrowing that is based on your next paycheck. Many people turn to payday loans during financial emergencies because they are convenient and accessible. Since most payday lenders don’t run a credit check, you can get approval even if you have poor credit.
If you apply online for payday loans, it usually doesn’t take longer than 10 minutes to complete your request. Once you get approved, the lender will extend the money through cash, check, or deposit it into your bank account in one or two business days. You will then have to repay the full amount along with the interest and other fees on your next payday.
In terms of the loan amount, you can borrow as much as $50 to $1,000, but it depends on your state’s laws and potential lenders. Note that there are states that do not permit payday loans. Thus, check first if you’re living in one of them.
Personal Loans
Personal loans are another financing option that you can use for various purposes, whether or not it’s an emergency. With a personal loan, you have a clear and predictable payment plan. You would repay the money you borrowed in monthly installments over a fixed amount of time, which is typically two to seven years.
Most personal loans are unsecured, which means that they don’t require any collateral. If it is secured, you would need collateral to back your loan, which is usually cheaper. However, you can lose your asset in case of a default.
You can get a personal loan from traditional banks, credit unions, or online lenders. It’s essential to note that your approval depends on several factors, and that may include your potential lender. Some lenders have higher qualifications, while others have higher interest rates.
It’s essential to shop around before you apply and commit. Let’s say you live somewhere in Illinois. You might need to look at different Illinois options for personal loans first. This way, you’d be able to find the best rates and terms for you.
Line of Credit
A personal line of credit is a flexible borrowing option that works the same way as a credit card. When you use a line of credit, you only apply once for a maximum limit. Then, you would have access to a pre-approved amount of money that you can later use for any purpose, at any time.
With a line of credit, you have funds on standby that you could use whenever you need instant cash, or you’re in a financial emergency. And you would only make payments on the amount you use, which you can borrow again once repaid, in a never-ending cycle.
Peer-To-Peer-Lending
Peer-to-peer lending is a borrowing option that is entirely done through online platforms. You would apply to a peer lending platform that would match you to potential lenders. Once the platform assesses your application, you would be assigned with the interest rate that suits you.
You would then receive the available options from the lenders who are willing to provide you the funds. It’s up to you which offer you will accept or decline. Note that the platform acts as the middleman, so you won’t be dealing directly with the lenders. You would also have to make payments through the same platform.
Merchant Cash Advance
If you have a small business, you’d probably experience cash flow emergencies now and then. That usually happens to many businesses despite having the most carefully made plans. In such cases, a merchant cash advance is one of the lifesavers for business owners.
With a merchant cash advance, the lender extends you a loan for a fixed amount calculated based on your monthly revenue. You would then repay it along with the fees through a percentage of your business’ daily debit and credit card sales. However, it’s worth noting that this might only work if your business has enough volume to support its cash flow.
Takeaway
Every borrowing option, no matter how convenient and streamlined, has potential benefits and drawbacks. But there is always one that will work best for your needs. It might take some time, patience, and research. Thus, even if you’re financially struggling, it wouldn’t hurt to equip yourself with these things, so you’ll know what to do if it happens to you.
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