What is an Emergency Loan?

If you’re new to the loan process, you might not know just how many different types of loans there are out there. Most people have heard of personal loans, home loans, student loans, and auto loans. These popular loan types all serve different purposes and come with different terms and rates. But they’re not the only loan types that are available today. After personal, home, student, and auto, a large number of borrowers rely on emergency loans. So, what is an emergency loan? 

What are Emergency Loans Used For?

As the name suggests, emergency loans are often used to obtain funds when you need them the most. Emergency loans are unsecured personal loans you can use to help cover unexpected expenses. This often includes things like medical costs after an accident or injury, a broken-down vehicle, a roof leak, or another large home repair. 

But emergency loans can also help you cover your rent or mortgage, utilities, and grocery costs. Emergency loans are personal and can be used for many different purposes. Just last year, a Bankrate poll revealed that less than half of Americans would be able to cover a $1,000 emergency with their existing savings. This is where emergency loans can come in handy. 

The Benefits of Emergency Loans

Aside from the primary benefit of getting money into your bank account to cover unexpected expenses, there are several other benefits of choosing an emergency loan over other funding options. For starters, emergency loans are flexible, making it easy to obtain funds for a wide range of circumstances. Emergency loans also rely on income and bank account information rather than collateral. 

This means that they’re easier to obtain if you have less-than-stellar credit and few major assets. The application and approval process is quick and easy, the requirements are clear, and the loan amount is targeted. The smaller loan amounts associated with emergency loans help ensure that you don’t borrow more than you need, making it easier to pay the loan back within the appropriate time frame. 

Payday Loans are Not the Same as Emergency Loans

You’ve probably heard of payday loans before since they’re not all that uncommon. Many people use payday loans in the case of an emergency, but these fixed loans can cause more problems than they solve. With fixed payday loans, the entire balance is due when the loan term is up, and that loan term usually only lasts about two weeks. After those two weeks, most payday lenders will give you the option to roll over the loan or extend the loan period. 

This may seem like a blessing at the moment but can quickly get expensive by racking up additional fees and costs that aren’t always transparent. On the other hand, emergency loans such as a Spotloan are often better suited for financial assistance in emergencies because they are short-term installment loans rather than fixed loans. Depending on the time of day that you are approved and accept your loan terms, you may even be able to receive the funds within the same day. 

Using a Spotloan to Cover an Emergency

Spotloans are short-term installment loans, which means that you can pay back your loan over time. Not only that, but you can choose how long you want to spend paying it off, rather than having the time frame be predetermined for you. Most repayment plans for these types of loans land between three and ten months rather than just a few short weeks. Another benefit is that you can pay your loan off early without paying any prepayment penalties. 

If you receive a bonus at work or a large tax refund, you can use the windfall to pay your loan off early without being penalized for it. For several reasons, compared to payday loans, Spotloans are the significantly better choice. But you should always do your research, carefully consider all options, and make a decision based on your unique circumstances and needs. You may be able to obtain better loan terms by going to your bank, your credit card company, or by borrowing from a family member or friend. Generally, it’s a good idea to exhaust some of these options first.