If you need money quickly, such as to fix your car or buy a new washing machine, you might decide an emergency loan is your best option. You also might be tempted if you’re struggling to pay your everyday bills. But don’t rush into it. Find out about emergency loans here.
An emergency loan is mostly like any other loan - you borrow a certain amount, agree to pay that back by a specific date and pay interest on top. The difference is you’re looking to get the money fast and pay it back within a matter of weeks or months. Emergency loans are sometimes called crisis loans.
You can get emergency loans from organisations like banks, credit unions, online lenders and ‘payday loan’ providers.
Depending on the lender, you could get it the same day, within a few days or in up to a week. How quickly you can get the loan will partly depend on how easily you can get the relevant paperwork together.
Emergency loans can work out very expensive. Before taking one out you should consider the cost of the loan, your ability to pay for it and if there are any suitable alternatives.
Costs vary, so it’s worth comparing deals and getting quotes from different lenders. If you’re not sure how you’re going to afford the repayments, you should explore other options. An emergency loan might be a short-term fix, but you don’t want it to end up being a long-term problem if you can’t keep up the repayments.
Emergency loans tend to have higher interest rates than longer-term loans plus there are likely to be arrangement and late payment fees. Lenders usually use APRs to show the annual cost of the loan, and this rate includes the interest charges plus the extra costs associated with the loan.
High interest rates and fees mean the annual cost (the APR) of some loans is 1,000 per cent or more. But there are limits on the amount a lender can charge.
The Financial Conduct Authority (FCA), which regulates the loans market, has set a cap on the amount emergency loan providers can charge. This cap is £24 per £100 over a 30-day term. And the maximum late fee is £15 plus interest.
So if you borrowed £500 with an APR of 1,000 per cent over 30 days, you’d pay £620 for the loan.
You'll need to provide documents to prove your identity, income and financial situation. These typically include:
A passport or driving licence
Recent utility bills and bank statements
Recent payslips
Your employment contract if you’re employed
Tax returns/accounts if you’re self-employed
There aren’t usually rules on what you can borrow the money for. But depending on why you want the money, it could make sense to look at other options. For example, if you’re looking to borrow to help with the cost of food or your housing expenses, you might be able to get help from your local council. Also, some organisations, like energy companies, have hardship funds or might let you pay your bill over a longer period.
There are several alternatives to emergency loans including overdrafts, credit cards and personal loans.
Depending on the amount you want to borrow, your current account might allow you to go overdrawn – possibly without extra costs. If you do go overdrawn, make sure you stay within the agreed limit otherwise you’ll end up paying hefty charges.
If you have a credit card, you might be able to use this instead of an emergency loan to pay for the emergency. You could use a credit card to get cash but if you do this watch out for charges which will start as soon as you withdraw the cash.
Another option is a longer-term personal loan. This could work out cheaper than an emergency loan, but you’ll need to borrow at least £1,000 to get one of these loans and it might take longer to get your hands on the cash.
There’s also ‘peer to peer’ borrowing. With this type of borrowing there are platforms that match you with another individual who’s prepared to lend money. There’s a fee to pay with this type of loan and you should compare rates with other options. As with any loan, you need to make sure you can afford the repayments before you borrow.
If it’s an emergency purchase you need, you could check any ‘buy now pay later’ terms offered by the seller. That would allow you to spread payments out. But make sure you can afford the repayments as this type of borrowing can work out very expensive if you fall behind with your payments.
Another option is to ask for a loan from family or friends. But bear in mind the impact this could have on your relationship if you can’t pay them back.
If you’re borrowing money because you’ve lost your job, are on a low income or your health is preventing you from working, it’s worth checking if you’re entitled to any benefits or grants. You can find a handy benefits calculator on the Turn2Us website.
If you’re worried about debt, there are several charities that offer free, independent debt advice and are completely confidential. They can help you assess your overall position, negotiate easier terms with lenders, work out the pros and cons of consolidating your debts and tell you about any relevant government assistance.
These organisations include Citizens Advice, National Debtline and StepChange.
Having a bad credit score doesn’t necessarily mean you won’t be able to get an emergency loan. But if you do have bad credit, you’ll probably have to pay a higher rate of interest for an emergency loan.
No. You can’t get a loan without a credit check. It’s a legal requirement. So, steer clear of any lender that says otherwise.
You can get an emergency loan if you’re self-employed, but you’ll need to provide specific information to show you can afford it. This is likely to include your recent accounts and/or tax returns.
You might be able to get a loan if you’re unemployed but think about how you’re going to afford it if you’re not getting paid. With guarantor loans, someone else promises they’ll pay if you can’t, but things can get awkward if this happens.
You might be able to get a secured loan. With this type of borrowing the loan is secured against an asset, such as your home or car. The interest rate you pay may be lower than with an emergency loan but if you’re unable to make the repayments you could lose your home or vehicle.
You can apply online, and some lenders have branches where you can get face-to-face support
With Experian, you can compare emergency loans from a range of lenders. Our online service lets you check your eligibility rating, so you’ll understand your chances of approval before applying.
Just remember we're a credit broker and not a lender. This means we don't provide loans, but we can help you find and compare different offers all in one place.
We're a credit broker not a lender†