Emergency loans are becoming increasingly popular today and that is probably due to the fact that you can not go anywhere it seems without seeing an advertisement for them. These ads quickly and efficiently convey the message that you can get access to cold hard cash through an emergency loan in less than an hour. Most make sure to confirm that you don't need good credit to qualify as such. Is this wrong? No, there is nothing untruthful about their claims. Are emergency loans a good idea? Well that is a different question all together. The answer is, it all depends on what type of financial consumer you are, and how savvy you are at keeping your money under control.
Emergency loans have been called a number of things, payday loans, cash advance, or emergency loans. Typically they are required by the average consumer for an emergency situation - unexpected car repair, the furnace goes out, Spot gets sick. Unfortunately however, because emergency loans are so easy to obtain, they very quickly stop becoming used for emergency purposes, and become an easy way to get cold cash fast. All that is required for an emergency loan these days is a pay stub, and a half decent checking account. The idea is that you promise to pay your emergency loan back with your next paycheck.
The typical emergency loan consumer carries the profile of having a moderate income, low to bad credit scores, and lives from paycheck to paycheck. Or, they survive from government check to government check. They come in with the application, checking account information, income verification and they leave shortly after with cash and a post-dated check missing from their book. For the moment, the emergency loan meets their immediate needs. Because these borrowers are often living day to day financially, they don't see the potential costs that emergency loans and cash advances will incur. Typically the interest on these loans is anywhere from 25 to 40% and that is before any fees from the emergency loan provider will tack on.
The alternatives to emergency loans are taking out of your 401 K, cash advances on your credit card, or home equity loans. Unfortunately, with all of these supposedly better alternatives, you are affecting your credit rating. Furthermore, each of these "solutions" to the emergency loan also come at a cost. With your401 Kor IRA, taking money out of a tax deferred investment account is a bad idea. You are going to be charged 10% penalty for withdrawing early for starters. You will also have to pay income tax on anything you get. The cash advances on your credit card are going to come at a higher interest rate than standard credit card purchases, some even as high as 30%. You are also going to be charged a fee just to access the cash, generally around 3-5%. When you add it up, this is more expensive than going with a payday loan. The Home Equity loan or line of credit is the safest of the other three alternatives, but you still pay interest on whatever you obtain. At the same time, it is not the most practical solution to re-mortgage your home if you simply need to pay a vet bill.
When you consider the alternatives, you can see that emergency loans and payday loans are not always a bad idea. We all experience unexpected expenses, and not everyone can afford a savings plan. If you are good with your finances, you can have the advantages of an emergency loan without staying in debt. If not, you will pay for it, and incur another bill to your debt oad. If the money is not in your bank on your post-dated timeline, you will begin to incur fees. These will come not only from your lender, but from your bank as well who will charge you NSF feesThe key to using emergency loans and cash advances is to pay them back when you say you will. It is okay to need money in an emergency situation. As long as you are careful, emergency loans can be a good alternative for you if you are out of options.
