How Do I Get an Emergency Loan Without Collateral?

You never know when you’re going to need an emergency loan. Your vehicle might start acting up and need immediate repair, or you might get an unexpected bill in the mail. Either way, if you don’t have enough funds in your bank account, you’re going to need to borrow some money.

Many loans require collateral. Collateral could be any property that you pledge to guarantee the loan, like your home or vehicle.  It’s important to recognize that the lender may seize the property if you’re unable to make your payments.

While collateralized loans may offer lower interest rates for applicants with excellent credit, they are a risk to the borrower. Missing payments and defaulting on the loan could escalate into the lender taking possession of the property. In this article, we’ll explore three alternative options for getting same day emergency loans without collateral.

1) Apply for an Unsecured Loan

Unsecured loans are personal loans that don’t require collateral to guarantee the loan. Instead, they rely on economic-based qualifications about the applicant such as:

• Credit score – Preferably a Good or Excellent credit rating
• Debt to income ratio – Typically 40 percent or less
• Job status

Unsecured loans are available from most banks, credit unions, and online lenders, and varying amounts are available. Like secured loans, unsecured loans may offer fixed rates and fixed monthly payment terms, and the repayment term can usually range from two to seven years. All things being equal, an unsecured loan could carry a higher interest rate than a secured loan due to the lack of collateral.

2) Make a Payment with Your Credit Card

Another strategy for covering an emergency expense is to use a credit card if the merchant or vendor will allow it. Normally, it’s not a wise idea to run up a balance; however, the credit is available if needed and won’t require you to put any personal property on the line. If you decide to use your credit card to make a purchase, it’s a good idea to establish a solid repayment plan to avoid finance charges that start as soon as the first billing cycle if you didn’t pay the purchase balance in full, and late fees. Remember, paying just the minimum amount due each month means finance charges can quickly become unmanageable.

If you don’t already have a credit card, you could consider shopping for one offering a zero-percent introductory APR. Be sure to check if the zero-percent APR offer is for purchases, cash advances, balance transfers, or some combination. An introductory APR is a special promotion that many major credit card companies offer to new cardholders. With this kind of promotion you won’t be charged interest on the balance during the time period advertised by the lender, typically six to 21 months. Keep in mind that balance transfer and cash advance transactions are usually subject to a percentage-based or flat fee. Remember the date your intro APR promo starts so the higher regular interest rate doesn’t surprise you when the promotional period is over.

3) Take Out a Cash Advance

Though it may be an expensive option, another way to get an emergency loan without collateral is to use your credit card to take out a cash advance. Cash advances are offered on almost all credit cards and work very similar to taking money out of an ATM (just like your debit card).

The catch to cash advances is that they’re known for carrying high-interest rates that start accruing from the date of the transaction, unless the card has a zero-percent APR promo that includes cash advances. Additionally, cash advances are subject to a percentage or flat fee of the total amount that is advanced. Even if you have great credit and your account’s interest rate for purchases might be relatively low, be aware that cash advances typically carry their own interest rate. Check your rate before using this strategy.

The Bottom Line

Even though you may need emergency funding right away, the last thing you’ll want to do is risk your home or vehicle by using it as collateral. Instead, get the money you need by applying for an unsecured but predictable installment loan, using a promotional zero-percent APR credit card, or by taking out a cash advance which might have no grace period and be subject to finance charges right away. As always, it’s best to review your budget and weigh your options based on your unique needs before taking out additional funds.