Unexpected expenses can catch you on the hop at any time. Chances are your savings are insufficient to meet them. It is hard to wait until you arrange funds when you are in an urgent need of money. Thankfully, there are direct lenders who can provide you with emergency loans.

Emergency loans from direct lenders are small loans exclusively designed to help tide you over when your financial condition is not good at all. You may lose your job or come across some sort of medical expense. In such circumstances, it is usual to find your savings falling short of cash.

There are various lenders providing these loans, but you should research thoroughly so as not to get trapped in an expensive deal. Most of the lenders provide emergency cash without running an affordability check. They can be a scam. Beware of such loans because they can be exorbitant. Once you fall into a debt hole, you might not be able to get out of it.

Emergency cash loans are small

First off, you should remember that emergency loans are very small. Most lenders may not lend you more than £500. Moreover, you will be required to pay off the full sum on the due date, which is usually not further than 14 days. You may find it a bit manageable as you will pay off the whole debt once and for all and then you are free from the obligation.

You borrow money because your budget does not have scope to meet that expense. Now you are to pay interest as well. How come would you pay off the whole sum on the due date when your budget is already withering?

You should borrow cash from lenders for an emergency only when you are sure about your repaying capacity. A missed payment will roll over the loan, and as a result of that, interest and late payment fees will continue to accrue. The cost of the debt will rapidly snowball and you will eventually fall into debt.

Emergency loans when your credit rating is poor

Lenders cannot sign off on your application without running an affordability check. They will go through your credit report to see your past payment behaviour. It will help them figure out if you can actually repay the debt on time. A hard credit check leaves search footprints on your credit file which pulls your credit points. Each credit inquiry can pull 5 points. The impact will be greater if you have got multiple inquiries on your credit report.

You can be tempted to apply for a loan deal with a no credit check. Emergency loans with no credit check are not legitimate, having said above. They can tie you into a debt spiral. If your credit file is not stellar, you might want to avoid a hard check. Contact those lenders who run soft inquiries. They do not leave search footprints and hence cannot be seen by other lenders. You will not see a drop in your credit score.

Ways to get emergency loans at lower interest rates

Loans with soft credit checks are more affordable than those with no credit checks at all, but they are still expensive because they cannot help a lender know your past payment behaviour. Soft inquiries are made to check your name and contact details. You should always try to aim to maintain a good credit report. Here is how you can get emergency loans at lower interest rates:

  • You should try not to have any other loan at the time of filing in the application. Your lender will be sceptical about your repaying capacity if you owe another loan too.
  • Pay off your credit card balance to keep the credit utilisation ratio low.
  • You should increase your income sources. Your lender will take you to be a less risky borrower if your income is high.

Be transparent about your spending

The approval rate for emergency loans is high because they are not subject to too much formality as in the case of long-term loans. Some lenders may ask you to submit your bank statement while others will simply get all your income and spending details in your application form.

Make sure you are transparent and honest about your spending. You should disclose it if:

  • You owe any debt
  • You have dependent households
  • You have high medical expenses
  • Some of the households are retired

Many people do not disclose their expenses and end up borrowing more than their affordability. A lender is responsible for assessing your repaying capacity carefully to ensure you do not fall into an abyss of debt, but they cannot be held liable if you provide inaccurate information about your income and spending.

There is always a chance of being turned down

There is no denying that emergency loans are easy to get approved. You do not need to undergo a lot of paperwork. You should simply provide your financial details through the application form and get the money almost the same day. However, do not be under the impression that you cannot be turned down. A lender will carefully check your income and spending to see whether you can actually afford to take on a new debt. Your lender will refuse you a loan if they find that you cannot repay the debt.

To sum up

You can borrow money from online lenders if you are caught unawares by emergency, but make sure you can repay it on time. Emergency loans are paid back in full and carry high interest rates. Figure out the estimated cost of the debt through an online calculator. It will let you gain insight into how much you can actually repay. Remember that the actual rates will be more than the estimated rates.

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