Emergency Loans for Bad Credit Do Exist: Here’s Where to Find Them

How does that saying go? When you make plans, the universe laughs.

If we’ve learned anything in the year of our lord 2020, it’s that things don’t always go according to plan. While the universe is likely having a big laugh right now, many of us are trying to cope with the fear of unexpected expenses, from emergency medical bills to natural disaster repairs.

Apart from having very rich parents, an emergency savings fund is the best way to prepare for unexpected expenses. But most people don’t have extra cash lying around to put into savings each month. Like hello, millennials are not living in studio apartments with five roommates because it’s cozy. It’s because we’re poor.

And with how astronomical medical, home and auto expenses are, it would take years to save up enough money for even the smallest unexpected expenses. If you’re living paycheck to paycheck, which let’s be honest many of us are, unexpected expenses are more than just an inconvenience. They can mean not being able to pay rent, afford groceries or make loan payments on time.

To make matters worse, many banks are unlikely to offer loans to people with bad credit. (Rude!) That’s where emergency loans for bad credit come in.

What is an Emergency Loan?

An emergency loan is an unsecured, personal loan that can be used immediately. If you’re stuck with a broken down car, have a giant medical bill due, or a pipe burst and flooded your entire bathroom, an emergency loan can provide the funds you need when you need them. This is a godsend if you have poor credit and do not have time to deal with getting rejected from multiple lenders. If you’re in a pinch, an emergency loan is often your best bet.

Emergency loans for bad credit can be used for:

• Damage from natural disasters
• Major car repairs
• School fees
• Unexpected medical expenses
• Replacing expensive home appliances

If your parents are breathing down your throat about having an emergency fund for these types of things, don’t feel bad. The majority of Millennials and Gen Z don’t have substantial emergency savings, because many of us are struggling to manage the cost of living on an entry-level salary or minimum-wage job. So, kindly remind your parents that the hundreds of dollars they put into savings each month when they were your age goes directly to your student loans and your cardboard box apartment that costs more than their mortgage.

So, if you do fall into the majority of people living sans emergency fund, what are your options when shit hits the fan? Instead of racking up debt on a high-interest credit card, an emergency loan offers fixed-rate monthly payments with lower interest rates, especially if you take out an emergency loan with a credit union.

Emergency Personal Loans vs. Payday Loans

We interrupt your regularly scheduled programming for this brief, but important, message that you will thank me for later. A payday loan is technically a type of emergency loan. However, it operates differently than an emergency personal loan in two important ways.

First, payday loans are offered through payday lenders. These are not the same as traditional banks or credit unions. And they are known for being *ahem* generally seedy.

Second, they have extremely high interest rates. Like up to 400%! Payday loans often take advantage of people when they are financially vulnerable. So they might give you a cash loan without checking your credit score, but you will have to pay incredulous amounts of money in interest. It’s simply not recommended.

So, just a friendly reminder to not confuse emergency personal loans with payday loans under any circumstances. Okay, moving on.

Emergency loans with low interest rates and flexible terms

Back to emergency personal loans. So, if you’re not going to a payday loans establishment, where can you go for an emergency loan? Credit unions!

If you have bad credit and are desperate for an emergency personal loan, a credit union is the best option. Unlike banks, credit unions are more likely to lend money to individuals with poor credit, because they are willing to consider other factors beyond your credit score. Plus, credit unions typically offer flexible loan terms and lower interest rates on loans.

In case you need a refresher on why credit unions are better than traditional banks, here are the highlights:

• All members are owners, which means you get owner perks
• Lower fees and interest rates
• Better savings interest rates (hello, free money!)
• Flexible loan qualification
• Local, community-driven vibes
• Customer services reps who give a flying hoot about your financial wellbeing

Typically, you must be a member of a credit union in order to get an emergency loan. If you’re nervous about emergency expenses, doing your banking at a credit union ensures that you will be taken care of in case of emergency, even if you don’t have great credit.

Most credit unions offer payday alternative loans between $200 and $2,000. Terms can vary from six months to one year and come with a maximum APR of 28%. However, many credit unions offer even lower interest rates.

Here are some of the best credit unions for emergency loans for bad credit in 2020:

• Alliant Credit Union: 6.24% – 27.24% APR
• Navy Federal: 7.89% – 18% APR
• First Tech Federal: 7.7% – 18% APR
• PenFed Credit Union: 6.49% – 17.99% APR

For reference the average APR for a three-year credit union loan is 9.21%, compared to 10.28% at traditional banks. This might seem small, but it adds up to significant savings over the duration of your loan term.