All About Emergency Loans for Students
BY LINDA ANDERSON
Financial emergencies come all the time. Every student has found themselves in a position where they need money fast and they can’t cover the emergency. So, how do you solve this?
Well, the easiest option is to apply for a loan. Accessing emergency loans these days has become very easy. There are literally thousands of loan providers online and offline that can extend a loan for you to cater to whatever emergency that you have as a student.
Why You Should Consider Emergency Loans?
An emergency loan is not the same as a normal bank loan. There are a number of factors that make these loans an ideal option for students. First, you don’t need any serious requirements to get them. The loans are fully secured and unsecured. Even people who have a bad credit history can still get access to these loans. Secondly, there’s a huge diversity of options to go for. From payday loans, title loans, credit card advance and so much more. You can definitely be sure that there is always something that will work for you at the end of it all.
Accessing these loans is also very easy. And we are not talking about the easy requirements here. Many loan providers have online platforms that allow you to apply for the loan anywhere you are. You can use any kind of Internet device too. Mostly, the loans will be processed in a few hours and the money transferred right away for candidates that qualify. After all, this is an emergency. The last thing you want is a credit provider that takes days or even weeks to get you the money. Emergencies need to be addressed quickly and the sooner you get the cash the better it will be.
Important Note: An emergency loan may help you get through financial difficulties. But there can be high fees and interest rates with some of these loans, depending on the type of loan you apply for and its terms. The Federal Reserve Board found that 4 in 10 adults aren’t able to cover an emergency expense of $400 or cover it by selling something or borrowing money. This is actually better than 1 in 2 adults in 2013.
Types of Emergency Loans
There are a few options you can go for in case you need an emergency loan as a student. All these options are different and come with their own unique pros and cons.
- Personal Loans
Personal loans are designed for people who have a very good credit history. These are typically installment loans extended to a person to use for whatever reason they see fit. The interest rates tend to be better, especially if your credit rating is good. The loans are also secured and unsecured. The great thing with personal loans is that you can even borrow very small amounts of money. The repayment period is often very short though. It is therefore advisable to take a small amount that you actually need so that you don’t have trouble paying it up within the allotted time frame.
- Credit Card Cash Advance
You can use the available balance in your credit card to take a small short term loan. This service is offered mostly by credit card companies. However, you will not be able to loan a big amount of money. The interest rates on credit card cash advance loans are very high. Processing fees are also charged and once you take the money out, the interest will start accruing. Just like with most loans, the rule here should be to only take the amount you need. Unmanaged debt can easily spiral into a financial problem if you are not careful.
- Payday Loans
Payday loans are probably some of the most popular emergency loan options in the market right now. Unlike personal loans where you can pay back in installments, payday loans are paid in full. The biggest challenge with payday loans is the interest. In addition to this, there’s a risk that the loans may lead to a debt trap. Think of it this way. Let’s say you have an emergency as a student and instead of just taking the amount of money you need, you decide to borrow extra.
When the salary from your part time job comes in at the end of the month, the entire loan amount will be deducted to repay the debt plus all the accrued interest. You soon realize that whatever is left in your bank account is not enough so to take care of your monthly bills, you decide to take another loan. This process can continue for years. Although payday loans are popular, they are not always the best option for students unless of course the other options don’t work for you.
- Pawn Shop loans
A pawn shop loan allows you to use an item of value as collateral to secure a loan. The pawn shop will check the value of the item and decide how much they are willing to give you based on that. If you are not able to repay the loan, the item will be sold and the money recovered.
- Title Loans
A title loan, also known as a car title loan, is a secured loan that you can take using your car title as the collateral. But how do title loans work? First, you will have to temporarily surrender the hard copy of your vehicle title to the borrower. Once this is done, the credit provider will assess your credit needs and extend an amount that fits your credit profile. When the loan is repaid you will get the car title back.
Emergency Loan Alternatives
Before you rush into emergency loans, there could be a few alternatives to try out.
- Low Interest Credit Cards – Low interest credit cards are ideal for students with good credit. But it requires a lot of financial discipline too.
- Medical Bill Repayment Plans – These loans are only specific to medical bills. Many hospitals will have such a facility so talk to them.
- Home Equity Line Of Credit – This loan option applies to homeowners only. You can simply use your home as collateral to secure an emergency loan. The terms of home equity line of credit loans are very unique and different from what we are used too. You need to be very careful before you apply.
Struggle to Repay College Loan?
Many individuals still struggle to repay college loans and handle small emergency expenses at the same time. Like we already mentioned, some studies have shown that over 40% of Americans are not financially capable of covering a small $400 emergency. That should be a red sign for all of you who think to get an emergency loan!
Nevertheless, with emergency loans, you will be able to get the money you need in just a few hours. Just make sure that you choose the right option in order to avoid high fees and high interest rates.
By line for Linda Anderson
I’m a writer and musician residing in Boise, ID in the United States, although I spent a small amount of time (about three years) living in the UK growing up, due to my father’s occupation. I graduated from the College of Idaho with a Bachelor’s Degree in Business and a focus in marketing.