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If you’re in financial difficulty and need cash fast, a payday loan online or an emergency loan might be what you need to be able to get the money you need, when you need it for a financial emergency.

Millions of people across the USA require the help of emergency and payday loans from time to time as bills and expenses like veterinary bills, medical bills and even rent and mortgage payments put pressure on people’s finances. From payday loans in Texas to emergency loans in Nevada and online payday loans in Ohio, there are many options for people to get cash fast when they need it, as long as they are eligible.

Payday loans are a popular form of short term finance and can be used as an emergency loan. There are many different providers and lenders who can provide a range of short term loans to those that need them.

You may not know it but there are other emergency loan choices available. Here we look at the differences between payday loans and other emergency loans to help you work out the right option for you.

What Is A Payday Loan?

A payday loan is a short-term loan that typically must be repaid on your next payday. The idea of these loans is that when you need a little extra cash, these loans get you through the tough times and then, when you receive your paycheck, you clear the loan and the interest.

The average American gets paid at the end of each month, so it is a common financial problem across most states to be short of cash if you face an unexpected expense or bill before your next payday.

A payday loan can help you borrow money between paychecks for one-off emergencies. Whether it is a household emergency, car repairs, or a hospital bill, a payday loan can provide the money upfront and in one lump sum. You then repay the payday loan and interest in full on your next payday.

What Are Emergency Loans?

You can also get emergency loans online, which are designed to provide loans specifically for financial emergencies. Common types of emergency loans in the US include:

  • Vehicle Repair Loans
  • Household Repair Loans
  • Bad Credit Emergency Loans
  • Emergency Loans for Medical Bills

These loans are designed for when a financial emergency pops up and where you find yourself with no alternative. Other emergency loan options offer relatively affordable short-term loans compared to high-cost payday loans. These loans include secured and unsecured loans and payday alternative loans.

It is important to remember that these loans are very much a last resort and should only be used when you find there is no other option and you have nowhere else to turn. They are not supposed to be used for luxuries and things like holidays.

What is the Difference Between Emergency Loans and Payday Loans?

Both emergency loans and payday loans in the USA are forms of high-cost-short-term loans. This means that they are provided by alternative lenders, unlike traditional loans which are provided by banks and high street lenders. In many cases, a bank loan will not be provided as fast as an emergency or payday loan and that is where specific lenders are there to help.

Speed of Funding

Although payday loans can be risky and expensive, they are often available immediately with same-day transfer directly into your bank account. The idea of all emergency loans is to get you the money you need quickly when facing a financial emergency in order to avoid falling into a spiral of debt and further financial difficulty. Depending on which alternative emergency loan you choose, you may also be able to get the money immediately or within one or two business days. Both payday and emergency loans can enable you to borrow money online instantly, which also makes them attractive to people in financial emergencies.

Amount You Can Borrow

Payday loans and emergency loans both offer flexible sums to deal with your emergency situation. If you need a small amount of money, an emergency loan could help. For example, you could get a payday loan to help you borrow $1,000 which can be used to help you with car repairs. Remember, that you should only borrow what you absolutely need and will be able to afford to repay.

Length of Repayment Terms

Payday loans are often due as early as your next payday, with the typical payday loan lasting only a couple of weeks. Payday loans are usually paid back all at once, giving you little time to recover from your financial emergency.

Unlike a payday loan, some emergency loans are paid back in installments over a set period, much like an online installment loan. While all emergency loans are designed to be short-term solutions, you have the added flexibility of choosing your repayment timeframe. You can therefore decide on a fixed term that will suit your needs and financial circumstances. However, some secured loans also have shorter terms of around two to four weeks.

Short Term Loan Interest Rates

Payday loans are a for of short term personal loan and so therefore are risky because they often come with higher than normal triple-digit interest rates, as well as higher loan fees. These rates can make repaying your loan tricky and end up adding to your debt if not managed properly.

Because of their higher interest rates, payday loans can trap borrowers in a cycle of debt that is difficult to escape from if the borrower cannot afford the loan. This is one of the reasons that payday and emergency loan lenders carry out a variety of affordability checks.

Alternative emergency loans can offer a fixed interest rate that is lower than payday loans.

The interest rate won’t change throughout the agreed term making budgeting for your repayments more manageable. Some emergency personal loans have better interest rates than credit cards, but almost all alternatives offer lower interest than the up to 400% APR of a payday loan.

Collateral and Loan Security

A payday loan does not require collateral, which means that you do not need to secure it against any high value asset like a property or vehicle, like you would for a mortgage or title loan, respectively. The lender will require proof of a stable income, usually of at least $800 per month.

Some emergency loan options require collateral to secure your loan. This means that you put something of value up as security for the repayment of your loan. For example, you can use a car, motorcycle, or boat as collateral. If you default on your loan, the item will have to be forfeited to the lending company. With good credit, you could qualify to get an unsecured personal loan.

Does My Credit Score Matter For Emergency Loans?

Some payday lenders in the USA don’t perform credit checks, or if they do, they are open to lending to people with bad credit scores or those who have been refused credit in the past. This is because they rely on your steady income as security that you will be able to repay the loan, rather than a guaranteed credit score.

Some lenders of emergency loans will require you to have a good credit score or at least a positive one. If you have poor credit or no credit history, it can be challenging to source the money you need. However, if you cannot qualify for an unsecured emergency loan, you still have the option of providing some form of property to use as collateral.

Another way to get an emergency loan with bad credit is to use a co-signer. If you have a friend or family member with an excellent credit score and a steady source of income, they can act as a co-signer to help you get approved. A co-signer is a guarantor for your loan, meaning the lender can require them to make repayments if you fail to meet them.