What is an emergency loan?

An emergency loan is a personal loan you get to cover an urgent expense. Emergency loans are often unsecured and don't require collateral; instead, the lender uses your financial information, including credit, income and other debts, to decide whether to offer you a loan and at what interest rate.

Borrowers who qualify for an emergency loan receive the money in a lump sum and repay it in monthly installments typically over two to seven years. These loans have fixed interest rates so your monthly payment doesn’t change.

Most reputable lenders report loan payments to the three major credit bureaus, so on-time payments build your credit, while missed payments can hurt it.

Emergency loan amounts, rates and funding time

Emergency loans have annual percentage rates from about 6% to 36% and loan amounts from $1,000 to $100,000. Lenders typically have minimum credit score and maximum debt-to-income ratio requirements for personal loans.

The best emergency lenders can approve your application and fund a loan within a day or two. Some offer secured, co-signed or joint loans, which may be easier to qualify for.

Even in an emergency, taking time to compare personal loans and potentially cheaper options can save you money and help you avoid harmful lenders that can damage your credit and finances.

» MORE: NerdWallet's picks for best bad credit loans

How to choose an emergency loan

Calculate the monthly payment

Review your monthly budget to determine what size loan payment you could afford. Then, use a personal loan calculator to see what loan amount, rate and repayment term you’d need to get the right monthly payment.

Compare interest costs

The loan with the lowest APR is the least expensive overall. You can use APR to compare emergency loans with other financing options. A loan with a long repayment term and low monthly payment may seem appealing, but it costs more in total interest. Look for an offer that balances affordable monthly payments with reasonable interest costs.

Check for fees

The most common fee to look for with a personal loan is an origination fee. This is often 1% to 10% of the loan amount, and it may be added to the total loan amount or subtracted from it before you get the funds.

Ask about funding speed

If you need cash fast, consider a lender that offers fast funding. Some lenders can fund a loan the next day, while others could take up to a week after approval. Online lenders may disclose the timeline in an FAQ or blog section of their websites.

» MORE: How long does it take to get a personal loan?

Compare emergency loans

How we chose the best emergency loans

We compared more than a dozen lenders to choose the best personal loans for emergencies. Among the factors we considered are:

• Minimum credit score requirement.

• Approval and funding time.

• The ability to add a co-applicant or collateral.

• Star rating.

• Annual percentage rate range.

• Loan amount.

• Origination fee.

How to get an emergency loan

1. Check your credit. Most lenders prioritize an applicant’s credit score in a lending decision, so check your credit report for any past-due accounts or errors, and correct them before submitting an application. You can view your report for free on NerdWallet or at AnnualCreditReport.com.

2. Determine what you can afford. Review your monthly budget to determine how much you can afford to pay toward the loan each month. That way, when you’re comparing loan offers, you can choose a payment that fits your budget.

3. Pre-qualify and compare offers. Even if you’re in a hurry, it’s worth the extra time to find a good rate on a loan you’ll be repaying for a year or more. Most lenders let you pre-qualify online to preview the loan’s rate, amount and repayment term. Pre-qualifying takes a few minutes and your credit score isn’t affected, no matter how many times you do it.

4. Gather documents and apply. Once you have a loan offer with affordable monthly payments, find the documents you need to apply for a personal loan. This can include W-2s, pay stubs, a government-issued ID and proof of address. You could get an instant approval decision, but it often takes a day or two.

Tips to get an emergency loan with bad credit

A bad credit score (below 630) doesn’t automatically disqualify you from getting a loan, but many lenders weigh your credit score heavily on an application.

Here are a few tips to get an emergency loan with bad credit:

• Add a co-signer or co-borrower: A co-signer or co-borrower can help your chances of qualifying or getting a good rate. A co-borrower on a joint loan has equal access to the funds, while a co-signer does not. If you can’t make loan payments, the co-applicant is responsible for them.

• Add collateral: Some lenders offer secured personal loans and consider the item used as collateral (usually a bank account or vehicle) when assessing an application. Adding collateral can improve your chances of qualifying, but the lender can take the collateral if you miss too many payments.

• Add up income streams: Your monthly income is another important factor on an application. Most lenders want to see that you have enough to cover regular expenses, make the new loan payment and have a little leftover. Many lenders consider things like Social Security, alimony or child support as part of your income.

Where to get an emergency loan

Online lenders

Online lenders usually let you check your rate before applying and offer a fast application process. But predatory lenders will try to exploit your emergency. Find a reputable lender that reviews your credit and income, and caps rates at 36%, which is the highest APR affordable loans can have, according to most consumer advocates.

Banks

Many banks prefer borrowers with good or excellent credit scores (690 or higher), but there are some exceptions. Some large banks, like Wells Fargo, U.S. Bank and Bank of America offer small loans that can cover emergencies. You must be an existing customer to get this type of loan, but the fees are much lower than what payday lenders charge.

Credit unions

Credit union members may have the most affordable emergency loan option. Federal credit unions cap personal loan APRs at 18% — lower than many online lenders. A credit union may consider an applicant’s membership history, in addition to their credit and income, to make a loan decision. Some credit unions offer payday alternative loans, which are small-dollar loans with low rates that are repaid over six months to a year.

» MORE: Top credit unions for personal loans

Best uses for emergency loans

Though lenders may ask why you’re borrowing, there are few restrictions on how you can spend the funds from an unsecured loan. Examples of emergencies you can pay for with a personal loan include:

• Medical or dental bills.

• Home repairs.

• Car repairs.

• Bills after a loss of income.

• Unexpected travel expenses.

Other types of emergency loans

High-interest loans, such as pawn, car title and payday loans, should be considered as a last resort after you’ve exhausted all other options. These emergency loans can be fast and easy to get, but they could do long-term financial damage.

• No-credit-check installment loans

  Some no-credit-check installment loans share similarities with payday and auto title loans. They’re available online and at storefronts. These lenders don’t review your credit score or history to determine whether you’re able to repay the loan and what a fair rate would be, which is why many no-credit-check lenders charge rates above 100%.

  Repayment terms on these loans may be longer than you need or a lender may encourage you to refinance the loan multiple times, resulting in exorbitant interest costs over the lifetime of the loan.

• Pawn loans

  Pawn loans require you to hand over a valuable item to a pawnshop as collateral for a small loan. You have to repay the loan, with interest, or the pawnshop will keep your item. APRs can reach above 100%.

  If repayment takes too big a bite out of your bank account, you could end up borrowing from the pawnshop again.

• Car title loans

  With car title loans, a lender assesses the value of your vehicle and lends you a percentage of that amount. If you accept, the lender holds the car title and you receive your loan. The lender doesn’t usually review your ability to repay the loan and can charge APRs of 300%.

  If you can’t repay the loan, the lender will take your car.

• Payday loans

  Payday loans are high-cost, short-term loans that are risky — even in an emergency. Payday lenders’ fees can equate to APRs of 400%, they don’t check your credit score and may not confirm your ability to repay the loan.

  Borrowers who aren’t prepared to repay the loan on their next payday often borrow again, causing them to slip into a cycle of debt.

Emergency loan alternatives

Cheaper alternatives to borrowing aren't always fast or convenient, and sometimes they require asking for help. But NerdWallet strongly recommends exhausting alternatives first, even in an emergency.

Here are some possible alternatives to an emergency loan.

Best for: Help meeting basic needs.

Community organizations such as charities, food banks and free loan associations can help you with home weatherization, free food, transportation to job interviews and other basic necessities. NerdWallet has a database of financial assistance programs in each state.

Best for: A no-credit-check loan with low- or no-interest for any purpose.

Though it may be uncomfortable to ask, borrowing from someone you trust may be the most affordable and safest option. A loan from a friend or family member will probably not require a credit check. You can draw up a loan agreement that includes when and how the money will be repaid as well as any interest the lender chooses to charge.

» MORE: How to borrow from and lend to family

Best for: Paying off medical debt at a low cost.

When you get a high medical bill, start with your free options: Set up a payment plan with your provider and negotiate the costs on your own. If you still need help, you can research low-cost medical credit cards or find a reputable medical bill advocate to negotiate on your behalf.

» MORE: How to pay down medical debt

Best for: Fast cash quickly if you’re able to meet other financial obligations.

If you need money for a one-time emergency like a car repair or vet bill, try asking your employer for an advance on part or all of your paycheck. You can also use a cash advance app with potentially low mandatory fees. These options effectively let you access your own money early, rather than providing additional cash that you repay over time, so be sure you can meet all your other monthly financial obligations with a rearranged pay schedule.

Best for: A large purchase that you want to repay over time.