When you are in a cash crunch, emergency loans can be a quick, easy solution to your financial pinch. In many cases, these loans bridge the gap between paydays or help you pay expenses for unexpected car repairs or illness.
However, many people are hesitant to apply for loans because they are afraid they won't be approved for the money they need. This article will cover the basic criteria used to issue emergency loans to help you decide if this approach is the right option for you.
Age and Financial Status
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Most banks and credit companies have a minimum age restriction of 18 to apply for an individual loan. The majority also require applicants to have a current checking account to be eligible for emergency loans. An active checking account shows you are in good financial standing, even if you are facing a financial emergency at the moment. It also allows the credit company to set up automatic loan payments from the account, if you are issued a loan that requires monthly payments.
Employment
Many credit companies and banks also require applicants of emergency loans to be currently employed at the time of the loan application. There are some institutions that will issue loans for people out of work, but the interest rates and fees may be higher.
Find out if the company you are interested in has an employment requirement and whether you must make a minimum wage amount to qualify for their loans. If they do, they will probably verify your status through your employer. Therefore, it is important to be honest about your job status, even if it means you have to pay a higher fee or look elsewhere for your emergency funds.
Credit Rating
Your credit rating will also play a major role in the type of emergency loans for which you qualify. If you have a stellar rating, you will be more likely to be approved for a loan with a lower interest rate or fee. However, many companies also work with people who have less than stellar credit. It is a good idea to know what your credit rating is before applying for a loan, allowing you to shop around for the best deal based on your specific financial information.
Secured vs. Unsecured Emergency Loans
Secured loans require some sort of collateral be put down to offset the cost of the loan. If you are unable to make your loan payments, the bank or credit company can take possession of your collateral as repayment. Unsecured loans do not require any type of collateral to issue the funds. These types of loans usually require different criteria for approval, such as a higher salary or better credit rating. Only you can decide if a secured or unsecured loan is the best choice for your situation.
Emergency loans are available for a variety of purposes, but they do have specific criteria for approval. It is important to know your specific financial situation before shopping for emergency funds to ensure you find a company that can best meet your individual needs.
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