Key insights:
- Emergency personal loans can help cover urgent, unexpected expenses by providing a lump sum that you repay in monthly installments
- When comparing personal loan options for emergencies, it’s important to look at APR, repayment terms, eligibility requirements and any fees or penalties
- Some lenders may fund approved emergency personal loans quickly, sometimes on the same business day
- Before borrowing, make sure the personal loan amount fits your needs and budget, and consider alternatives like a personal line of credit or home equity financing if they better suit your situation
Unforeseen expenses can turn an emergency into a financial strain, especially if you don’t have savings to cover them. Fortunately, personal loans can provide financial flexibility during challenging times, helping you get back on your feet as quickly as possible.
Let’s look at how emergency personal loans work and how to use them to meet your financial needs when necessary.
What is an emergency personal loan?
An emergency personal loan is a personal loan used to cover immediate, unexpected and urgent needs. Emergency loans can be secured or unsecured. While secured emergency personal loans require borrowers to provide collateral, unsecured loans do not. Unsecured personal loans are a common choice for emergencies, offering borrowers flexibility and convenience.
How emergency personal loans work
Personal loans provide a lump sum of money to qualifying applicants, who pay the loan back over time in monthly installments, including interest. Lenders typically consider your creditworthiness and income to determine whether you qualify for a loan and what your interest rate should be.
If your application is approved, you’ll receive the funds via check or direct deposit. You may then use the money to help cover qualifying expenses, which typically include emergencies.
How to apply for a personal loan
Once you decide on the right lender and personal loan, you can generally fill out an application online. In addition to checking your credit score, your lender will typically review documents like a government-issued ID and proof of income.
With personal loans, you usually don’t have to wait long to receive funds once you’re approved. In fact, some lenders may be able to deposit money into your bank account as quickly as the same business day.
How to choose an emergency personal loan
Even in an emergency, it's important to do your research before you submit an application for a personal loan. Consider reading customer reviews, comparing lenders and reviewing the following factors:
APRs
Personal loan APRs provide a straightforward figure for comparing the costs of various loans. APRs are calculated by combining fees and interest rates over a 1-year period. In general, if you’re comparing loans with the same repayment terms, the lower the APR, the less you’ll pay to borrow.
Repayment terms
It’s important to ensure that a personal loan’s repayment terms make sense for you. If you find that the monthly payment doesn’t fit into your budget, you may consider opting for a longer repayment period to help bring that figure down. Short repayment terms, by contrast, typically have higher monthly payments but may help you pay less in interest.
Eligibility
Each lender has its own requirements for borrowers, but they’ll typically consider factors like income, employment, and creditworthiness. If available, use pre-qualification to help you determine whether you’re likely to qualify for a given loan, and if so, what your terms could be. While not a guarantee of approval or terms, pre-qualification is a useful tool for evaluating your options without affecting your credit score.
Penalties and fees
Personal loan penalties and fees can vary widely depending on the lender. For example, some may come with origination fees, late fees or even prepayment penalties. These fees can increase the total cost of your emergency personal loan, so it’s important to be mindful of them as you explore options.
How to use an emergency personal loan
Personal loans can offer a lifeline to help you navigate various unexpected events. For example, if storm damage makes your home unsafe, or if your car breaks down and you have no other way to get to work, an emergency personal loan may help meet your needs quickly.
Keep in mind that while personal loans may be used for most purposes, there are exceptions, which vary by lender. For instance, some personal loans prohibit using the money to pay off tuition or other educational expenses. So, it’s important to understand any restrictions in advance.
Alternatives to emergency personal loans
Before you take out a personal loan, you might also consider other options, including personal lines of credit, home equity loans and home equity lines of credit (HELOCs).
Personal line of credit
Personal lines of credit offer you access to a pool of money with a pre-determined limit, so you can withdraw money as needed, then repay the borrowed funds over the repayment period. A personal line of credit may be a good option if you’re facing an ongoing issue with an indeterminate cost, like a long-term home renovation. Financial institutions may provide secured personal lines of credit, which require collateral, and unsecured personal lines of credit, which may have higher interest rates but don’t require collateral.
Home equity loan or HELOC
If you own a home with enough equity, you may have the option to take out a home equity loan or a HELOC.
Home equity loans allow you to borrow against the equity in your home. They provide a lump sum that you pay back in installments over time, plus interest.
HELOCs also involve borrowing against your home’s equity. However, HELOCs allow you to withdraw funds as needed, up to a limit, during the draw period rather than providing a single lump sum. After that withdrawal period ends, you’d enter the repayment period, during which you’d either repay the entire balance at once or via installments.
Find the right personal loan for you
In the event of an emergency, you can apply to get an unsecured personal loan, which is a loan that doesn’t require collateral, from a bank, credit union or online lender. Each lender has their own requirements, so compare them before you decide.
Citi® offers personal loans that may help you overcome temporary financial hurdles and get back on track. If approved, you could receive your funds the same business day if you opt to have them deposited directly into a Citibank account. Otherwise, personal loan funds can be deposited into an external bank account within 2 business days.1
Think you could benefit from a Citi® Personal Loan? Apply online today to get started.
Emergency loan FAQs
How quickly can I get a personal loan for emergencies?
Personal loans may offer quick funding for qualified applicants. Some lenders may even provide funds on the same business day that the application is approved.
How will an emergency loan impact my credit?
Personal loans may affect your credit in different ways. For example, applying for a personal loan adds a hard credit inquiry to your credit file, which can have a small, temporary negative impact on your credit score. Applying for multiple loans at once can make this impact more significant. Using pre-qualification to help you determine whether you’re likely to qualify for a given loan can help you avoid this until you’re ready to formally apply.
However, making on-time payments for your personal loan each month may help improve your credit score over time.
Can I get an emergency personal loan with a low income?
Personal loans may have minimum income requirements to minimize lenders' risk of non-payment. Using pre-qualification may help you determine whether you’re likely to qualify for a given loan without affecting your credit score.
How much can I borrow with a personal loan?
Maximum personal loan amounts vary based on the lender, and lenders may consider your creditworthiness when determining how much you’re eligible to borrow. In general, personal loans can range anywhere from a few hundred dollars to tens of thousands of dollars. To help minimize your debt, it’s recommended to take out only what you need to cover your emergency. Be sure it’s an amount you can comfortably repay under the loan terms.
This article is for educational purposes. It is not intended to provide legal, investment, or financial advice and is not a substitute for professional advice. It does not indicate the availability of any Citi product or service. For advice about your specific circumstances, you should consult a qualified professional.
1Once approved, Citibank can deposit funds directly into an existing Citibank account the same business day, or within 2 business days when deposited to an external bank account, provided the bank account has not been recently opened. In such instances, Citi reserves the right to reject the bank account as the disbursing account for personal loan funds, and you can select another bank account or select to receive a check by mail, which is delivered generally within 5 business days.
