Do I need money right away?
You should understand that the purpose of an emergency loan is not to make a large-scale one-off purchase with long-term payback. UK emergency loans are strictly designed for short-term, immediate spending demands. If your financial requirements cannot wait until your next payday, an emergency loan will help you to solve the issue regarding your financial shortfall. These types of loan essentially provide you with a financial lifeline or bridge until you next receive payment from your employer.
How much emergency money do I need?
Emergency loan offers are usually for low amounts, in comparison to other forms of finance such as a mortgage. Short-term emergency loans are ideal for serving emergency financial requirements up to around £2,500. These loans provide immediate access to cash when you need it the most. With an emergency loan, speed makes all the difference because the loan is designed to cover unexpected expenses which simply cannot wait.
Before applying for an emergency loan, you should consider precisely how much you need. Don’t be tempted to borrow more than what you require to cover your unexpected expense. By only borrowing what you need, you’ll find it easier to pay back your emergency loan in the long run – which brings us to our next point.
Can you afford the repayments on an emergency loan?
Before agreeing to the terms of a loan, you should think about how the repayments will affect your regular financial situation. You should always plan to repay an emergency loan in as short a time as possible (no more than a few months if you can afford to). This is because emergency loans are not designed as long-term borrowing solutions, and the APR on these forms of finance can be quite high for those who repay over several years.
Prior to taking out an emergency loan, consider the following:
- Can my budget accommodate the timely repayment of this loan?
- Will the additional expense cause me further financial problems further down the line?
- Can my credit rating deal with potentially being adversely affected as a result of making late payments?
Ultimately, the last thing you want to do while attempting to address a financial emergency is to create another crisis a few months down the line. If the answer to any of the above three questions is “no”, you may want to reconsider whether an emergency loan is the right form of financing for you. Alternatively, you might want to consider taking out a smaller loan and making ends meet with it until you can properly address your emergency issue.
For example, let’s imagine your washing machine stops working. You could use a small loan to budget for launderette use or downgrade to a smaller washing machine, instead of taking out a large loan to buy the latest washing machine. These are the sort of situations that emergency loans are perfect for.
When to consider an emergency loan
The purpose of an emergency loan is to provide you with rapid access to cash when you are faced with an urgent spending requirement. These loans are an alternative to traditional finance and are aimed at the most stressful and pressing monetary needs.
They differ from bank loans in that you won’t be expected to make multiple in-person visits to discuss circumstances with your bank manager. Instead, an underwriter (or team of underwriters) will consider your financial viability (occupation, current wage, outgoings, dependents and so on) before offering you the opportunity to receive funds within hours of applying online.
Emergency loans are incredibly flexible as they allow you to access funds in the short-term to cover unexpected costs. It can be quicker to access an emergency loan in comparison to a credit card or cash advance, for example – but remember to consider how and when you will be able to make repayments.
Each case for an emergency loan is unique. Ultimately, the decision on whether to accept an offer of an emergency loan is up to you. It’s good practice to weigh up what you need the money for and to not get carried away by borrowing more than you can afford to pay back. By only using these loans for emergency purposes, you’ll put yourself at less risk of spiralling into debt.
Repaying an emergency loan
Emergency loans are repaid with interest, which is why it makes sense to only borrow what you can afford to. There are lots of reasons why people take out these types of loan, which we’ll focus on later.
You’ll usually repay an emergency loan over a short time (up to three months, approximately). Your lender will typically want to know when you get paid, so they can arrange to take repayments in monthly instalments by direct debit.
If you think that you’re going to struggle to make a repayment, the important thing is to speak to your lender. Most lenders will be happy to come to some sort of agreement with you. This could involve extending the length of time your loan will be repaid over – although you should be aware that this could mean paying more interest in the long-term.
Some lenders may even be willing to give you amnesty for a couple of weeks or perhaps even a month, to allow you some breathing space before you make repayments again. Of course, terms and conditions will vary from lender to lender, which is why you should always read the small print prior to accepting an emergency loan.
The important thing when applying for an emergency loan is not to stress. These loans are aimed at short-term spending needs which can cause you to feel pressure. You won’t be able to finance a major purchase (such as a mortgage) with an emergency loan, but these convenient resources can certainly provide you with a financial lift until your next payday.
If you need money right away and without restrictions or judgement, perhaps it’s time to apply for an emergency loan. Understanding how these loans work and when to take them out could even help you to become better at managing your finances. There are lots of benefits to emergency loans, some of which we’ll look at below: