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Emergency loans

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Last updated: 04 July 2022

Once in a while, an emergency cash injection is needed. It could be a variety of reasons, when you need it, you need it fast. 
 
Fortunately, this kind of help is available in the form of emergency loans. If you’re interested to know what these are, then you're in luck. We’ve put together a quick and easy guide, so you are up to speed with everything you should know.

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What is an emergency loan?

Emergency loans are a general term for cash that’s needed in a hurry. Rather than being a specific type of product, it refers to any loan that you can have in your bank account within minutes and hours, rather than days and weeks. Repayment terms will vary depending on lenders and the amount borrowed, but it’s always advisable to pay them back as quickly as you can.

What are emergency loans for?

Whereas an emergency loan could technically be for anything, it’s important to use them sparingly. Because they are so convenient, they often come with a high price tag.

So, when you're considering one, it’s important to ask yourself whether you really need it and whether you can pay it back in time. Examples of when an emergency loan is a good idea include:

  • Car repairs: If you are someone who needs to drive, for example to take the kids to school or for work, then having a working vehicle is kind of a necessity. As many repairs can cost £1,000 ore more, there’s also a high possibility you don’t have the cash lying around. 
  • To pay rent/bills: Times are a little tough at the moment. The cost of living crisis is causing a squeeze on household finances, which is being dubbed the worst in a generation. This increases the chances that your last paycheque might not survive intact to pay for things you need to get by. You can often find emergency £1,500 loans to cover your rent or other bills. 

Bad examples of reasons to get an emergency loan

  • To go on holiday
  • To buy a new car you don’t need
  • Because you're bored

How much can I borrow for an emergency loan?

This will depend a lot on who the lender is, as well as your circumstances. Generally speaking, you won’t be able to get more than a few thousand.

As the cash needs to be in your account quickly, the checks carried out are minimal. That is seen as a higher risk for the lender, thus the lower amount and high interest.

However, this isn’t always the case. It is possible to borrow up to £10,000 in some situations. You will want to make sure you have a good payment plan in place though, as larger amounts carry higher APRs.

How much does an emergency loan cost?

On top of the principal loan amount, you will be required to pay interest in the form of APR (annual percentage rate). Exactly what this is will depend on the amount borrowed, the time repaid and how quick you need it.

If you need the money immediately, and borrow a relatively small amount then the APR could be quite high. For example, a £500 loan from a payday lender - which will generally be the quickest and easiest type of loan you can get - repayable in a month, could easily cost you £600, which is an APR of 220%. If however, you borrowed £2,000 and paid it back in two weeks, you would only pay something in the region of £2,133, an APR of 80%.

Generally speaking, personal loans, which a few days to arrive in your account and are repaid over time have APR rates of 13.5%, so are a much better deal. However, depending on your emergency, this might be too long.

As well as the APR rate, your loan might come with late fees or an upfront cost. It’s important to understand what these are before taking out a loan, as late fees especially can be very high if you start to miss payments.

Who can get an emergency loan?

Surprisingly, being in an emergency isn’t the only thing that allows you to qualify for an emergency loan. While criteria will vary slightly from company to company, you will generally have to:

  • Be over 18 (or in some instances over 21)
  • Prove you have a stable income
  • Be a UK resident

What about if I have bad credit?

Even if you have a poor credit rating, you should be able to get an emergency loan. It might limit your options or increase your interest rate, but there will almost always be something available to you.

However, the majority of lenders will carry out some affordability criteria. This is derived from looking at the loan you want and comparing it to your salary, benefits and general financial situation. Others will go a step further and look at your actual credit history, and if yours is particularly patchy, you may get denied.

While these kinds of checks might be frustrating, they are designed to protect you and ensure that you don’t get yourself into financial trouble.

Where can I find an emergency loan?

Once you have established what kind of emergency loan you want, you will need to have the following details handy:

  • Your monthly salary
  • Your expenses, e.g rent, childcare, bills
  • What address do you live at now, and is your address history
  • Bank account details
  • Contact information
  • Date of birth

Now, all you need to do is use our loan comparison tool to see what deals are available to you right now.

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Michael Quinn

Author: Michael Quinn

Michael is a dedicated author helping usave to write guides, blogs and news for the last four years. When not writing articles, you can usually find him at wine tasting events or having a political debate on the night tube.

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