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Best short term loans for an emergency

best short term loans

The best short-term loans for an emergency include funding that is convenient and affordable for the borrower. Depending on their financial situation, borrowers may find these loans via personal loans, bad credit loans, cash advances, payday loans, etc. 

The thing about life is that you never know what is around the corner. You can never fully anticipate what life will throw your way next. Sometimes you get hit with surprise expenses that throw your budget completely out of whack. It is crucial that you are prepared to handle these emergencies, both major and minor, as they appear in your life. 

Most financial experts will strongly recommend having an emergency fund in place considerable enough to handle financial emergencies. Having a satisfactory savings account designated specifically for emergencies will negate the need to take on any debt to cover unexpected costs. However, the best option for those who do not have a savings or emergency fund to rely on might be to borrow money in the form of a personal loan, a revolving credit account, or from family. 

It is a good idea to research all your options for the best short-term loans before deciding what you will rely on for your emergency.  We will walk you through everything you need to know about personal loans and show you how to be better prepared next time an unexpected emergency comes your way.

Loan Breakdown

Loan FeatureDescription Consumer Benefit 
Flexible Payment Options Some lenders offer options like bi-weekly payments or grace periods.Helps borrowers manage repayments more effectively, especially in tight financial situations.
Online Application ProcessMany short-term loans can be applied for entirely online.Convenience and speed in accessing funds, often with less paperwork
Loan Amount RangeThe minimum and maximum amounts a lender offers for short-term loans.Allows consumers to borrow exactly what they need, avoiding over-borrowing.
Funding Speed How quickly the loan is disbursed after approval.Critical for emergencies where immediate cash is needed.
Customer Service Availability Availability and quality of lender’s customer support (e.g., 24/7, online chat, phone support).Provides assistance and clarity for borrowers, especially important for first-time or anxious borrowers.
Repayment Term Flexibility The ability to choose or modify the loan’s repayment term.Offers control over the loan’s duration, aligning with the borrower’s financial situation.
Early Repayment Policy Terms regarding the ability to pay off the loan early and any associated fees.Enables borrowers to save on interest if they can repay early without penalties.
Digital Account Management Online platforms or apps for managing the loan, making payments, and viewing balance.Enhances convenience and transparency in managing loan repayments.
Loan Renewal Options Possibility to renew or roll over the loan (subject to terms and conditions).Provides flexibility in case the borrower needs extended time for repayment.
Credit Reporting Whether the lender reports repayment history to credit bureaus.Can help in building or improving credit score if the loan is repaid responsibly.
Disclaimer: Please note that the information provided in the above chart is for general informational purposes only and should not be considered as financial advice. Loan terms, features, and benefits can vary significantly between lenders and are subject to change. It is important for consumers to conduct their own research and consult with financial professionals to ensure that any loan product meets their specific financial needs and circumstances.

Is Borrowing Money a Good Idea?

Determining whether borrowing money is a good idea or not depends on many different factors including your financial situation, your reason for borrowing, and your method through which you borrow money. While it is wise to have emergency funds set aside for surprise expenses, many people do not have that available. For them, the only option may be to borrow some short-term cash.

It is important to note that obtaining a personal loan will always incur costs through an interest rate and origination fees. You can’t get a personal loan at the drop of a hat and it has a major impact on your credit score, so it is not something to be treated lightly. Borrowing money to get through a tough financial time can be a good solution if it is not overused.

Consumers are not advised to take out personal loans at any minor inconvenience as they can be costly, particularly if you have a low credit score. However, borrowing money through a short-term personal loan to handle a financial crisis could be a very good idea if you are prepared for what comes along with it.

Personal Loans for Emergencies

When you don’t have money ready to handle a surprise expense, an emergency personal loan could be the way to go. Personal loans are one of the most versatile loan types in the industry as they can be used for many different purposes, and they come in all shapes and sizes. According to Money.com, approximately 26.9 people currently have outstanding personal loans.1 

Some of the best short-term loans are personal loans, but you can also find them with larger loan amounts and longer-term lengths. It all depends on your unique needs and financial situation. 

Personal loans are typically unsecured loans which means they are not set up against any kind of collateral to secure the amount you borrow. When a personal loan is unsecured, the lender may choose to charge higher interest rates to compensate for the increased risk that comes with no collateral unless the borrower has an excellent credit history

One thing you should be keeping in mind is that you will need to be prepared to pay off the loan in monthly installments. Financial emergencies can make it difficult to afford debt payments so you need to be sure before you get a personal loan that you can repay it in a timely manner.

Reasons People Get Personal Loans

The reason you might need a personal loan could be because of any number of life’s emergencies that have a tendency to sneak up on us. Personal loans are not limited to one specific purpose like auto loans or home loans are. Here are a couple examples of emergency reasons why a borrower might seek out a short-term personal loan: 

Car or Home Repairs

There are some expenses that simply cannot wait until you have built up enough money in your savings account. If your car breaks down, you are going to need to fix it immediately so that you can drive yourself to and from work. A functioning car is necessary to get yourself to the grocery store and pick up your kids from school. If you don’t have the cash on hand to pay for the repairs, your best option may be to get a personal loan to cover them. 

The same can be said for certain home repairs. While you might be able to wait to do that remodel to your bathroom you have been dreaming of, a broken hot water heater will likely need to be repaired right away. 

Monthly Expenses

If you are going through financial hardship and cannot cover your necessary expenses, you might need a short-term loan to make it through to your next paycheck. It can be incredibly scary to not be able to afford your basic living expenses but there are options that can help you make it to next month. 

However, you should be aware that a short-term loan can be difficult to pay off on time when recovering from a hardship. So be extra careful to read through the loan terms carefully so you can be sure you can afford to pay it off.

Medical Bills

The American healthcare system is expensive and confusing. You might have been hit by a health scare you did not expect or medical bills that are not included in your health insurance coverage. These medical bills could be unaffordable without completely derailing your monthly budget of necessary expenses. In this situation, a personal loan could be a way of handling your medical costs until you are able to make a few more paychecks to pay off the balance.

Minimum Credit Score Requirement For a Personal Loan?

There is no set minimum credit score requirement to be approved for a personal loan as there are so many different types of lenders and personal loans available. There are some lenders who have a minimum credit score you must meet for approval while many lenders will approve borrowers with lower credit scores. Every lender will check your credit report during the loan application process, but some online lenders don’t put as much weight on your credit history.

Your credit score will always play a role in your loan agreement even if you are approved because your credit score will be used to determine your loan terms, loan funds, and the interest rate. It is for this reason that most bad credit loans will have incredibly high interest rates. 

Bad Credit Personal Loans

While it is possible to find many online lenders who are willing to work with borrowers with a poor credit score, you need to be particularly wary of the costs that will be involved with personal loans for people with bad credit. The origination fees might be higher with personal loans when you have a low credit score. 

When a bad credit personal loan has short repayment terms like is the case with payday loans, it can be incredibly challenging to pay off the loan on as the interest rate charges can make the monthly payment unaffordable for many people. If you are considering obtaining a personal loan with a poor credit score, read through your loan terms very carefully before signing the loan agreement, so you are positive that you will have enough money in your bank account to cover the loan origination fee and each monthly payment according to the repayment terms you are agreeing to. 

Best Short-Term Loans for Emergencies

There are a fair amount of options available to you for borrowing money on a short-term basis to help you through a financial emergency. Some personal loans are built to have short repayment terms, such as payday loans. However, there are other types of loans that you can pay off early or ask the lender for shorter loan terms. 

Here are some of the more popular short-term loan options that might be available to you regardless of credit score: 

Borrow From Family or Friends

One of the most affordable options for borrowing money in an emergency is to ask a family member or friend to lend you some cash. If you have a good support system of people in a better financial position than you, you may be able to ask for a short-term loan from them to get through a challenging time without having to worry about a high interest rate or pricey origination fees. If you want to repay the loan within a short period of time, you can set up a monthly payment with your loved one so you can put it behind you without adding any tension to the relationship.

Payday Loans

A payday loan is probably the most commonly known type of short-term personal loan that you have without a minimum credit score requirement. A payday loan is meant to be an emergency solution to help individuals cover their expenses until their next paycheck, hence their name. Payday loans are known for their incredibly high interest rates and very short loan terms. If you aren’t careful, it can be easy to end up in a debt cycle with a payday loan so it is important to only obtain one if you don’t have other options.

Secured Loans

Getting approved for a secured loan despite a low credit score could be a lot easier than for an unsecured personal loan. Secured loan funds are borrowed against collateral which can be seized if the loan is defaulted on, so there is far less risk to the lender when approving subprime borrowers. 

Peer-to-Peer Lending

Peer-to-peer lending platforms and services connect borrowers in need of personal loans to investors who are looking to make money through interest. There is no set minimum credit score that lenders require for a P2P personal loan, as each lender has different standards for approval. In fact, some investors prefer to lend to subprime credit score borrowers because they can get a larger return on their investment through higher interest rates.

Improve Your Credit Score to Get Better Rates

Want a credit score that could secure more competitive interest rates on a personal loan? You can access more affordable monthly payments, better interest rates, and the best short-term loans with a higher credit score. Many of the best rates can only be accessed through more traditional avenues such as a bank or credit union. You can boost your credit score considerably by practicing responsible credit usage and taking a few practical actions to clean up your credit report. 

To improve your credit score and clean up your credit history, continue making the monthly payment on each of your credit cards and loans on time. Late payments can bring your credit score down considerably. You will also want to reduce your credit utilization ratio so that it falls below 30%. 

Check your credit report often so that you can keep track of your progress and make the necessary changes you need to make if something you are doing doesn’t seem to be working. Finally, we recommend that you take a break from applying for new credit of any kind for a time as many hard inquiries too close together can harm your credit score. 

Build An Emergency Fund For the Future

To avoid the need to rely on personal loans in times of crisis in the future, build an emergency fund to improve your overall financial health. If you have a chunk of cash set aside in a bank account specifically for financial emergencies, you will no longer need to depend on credit cards or a personal loan. Rather than getting further into debt, you can simply use the money you saved and restock the emergency fund when you are back on your feet again. According to TIME Stamped, the average American household has $41,600 in savings.2 

Start small with your very first emergency fund. We recommend aiming for $1,000 at the beginning and building it to a more considerable amount as your finances grow. The best end goal to have for your emergency fund is to have three to six months worth of monthly expenses saved. With an emergency fund this substantial, you will be able to remain financially stable through unemployment or any other unexpected chaos that life might throw your way.

FAQ: Short Term Loans 

What is an origination fee, and how does it affect a short-term loan?

An origination fee is a charge by the lender for processing a new loan application. Furthermore, a loan origination fee is typically a percentage of the loan amount and affects the total cost of your loan. When considering a short-term loan, factor in the origination fee to understand the true cost of borrowing.

How does the loan term impact the cost of a short-term loan?

The loan term, or the duration over which you repay the loan, significantly impacts the total interest paid. Shorter loan terms usually mean higher monthly payments but lower total interest, making the loan less costly over time.

Is a bank account necessary to obtain a short-term personal loan?

Yes, most lenders require a bank account for loan disbursement and monthly payment withdrawals. Some lenders might offer alternatives, but having a bank account generally provides more loan options and convenience in managing loan payments.

How crucial is credit history in determining the eligibility for a short-term loan?

Credit history is a key factor lenders consider for loan approval and terms. A good credit history can lead to better interest rates and terms, while a poor credit history might limit options or result in higher costs.

Can I get a personal loan with a minimum credit score below 600?

Yes, it’s possible to obtain a personal loan with a minimum credit score below 600, but the options may be limited. Lenders specializing in bad credit loans often offer such products, but be prepared for higher interest rates and additional fees.

What should I consider when choosing a lender for a short-term personal loan?

Evaluate factors like interest rates, fees (including the loan origination fee), loan terms, the flexibility of repayment, and lender reputation. Also, consider how quickly the lender can disburse funds and whether they accommodate borrowers with your minimum credit score.

Are there alternatives to traditional short-term loans if I have a poor credit history?

Yes, alternatives include secured loans, a loan from a credit union, payday alternative loans, and borrowing from friends or family. These options might offer more favorable terms for those with poor credit history.

How can I use a short-term loan to improve my minimum credit score?

Timely repayment of a short-term loan can positively impact your credit score. Ensure you make all payments on time and in full, as this demonstrates responsible credit management.

What are the risks associated with short-term loans for emergency expenses?

Risks include high-interest rates, the potential for debt cycles (especially with payday loans), and the impact on your credit score if you fail to repay on time. Always assess your ability to repay before taking a loan.

Can I prepay my short-term loan without penalties?

This depends on the lender’s policies. Some lenders allow early repayment without penalties, while others may charge a fee. Check the loan agreement for terms regarding prepayment.

A Word From CreditNinja About Short Term Loans 

CreditNinja knows that finding an affordable short term loan can be difficult, especially if you don’t have the best credit score. Instead of worrying about minimum credit score requirements, focus your efforts on finding a lender who is the best fit for you. Lenders like CreditNinja cater to borrowers who are working with a less-than-perfect credit score, offering convenient loans, manageable terms, and competitive rates! You may even be able to use CreditNinja installment loans to improve your credit score over time. 

Check out our easy online application to see how much money you could get today! 

References: 

  1. The Personal Loan Industry Is Booming — Here’s Why | Money.com
  2. Average Savings Account Balance of Americans (2023) | TIME Stamped
  3. Best short-term loans: Compare your options | Fox Business 
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