Emergency Loans for Bad Credit

If you are faced with an unexpected expense and have bad credit, all is not lost

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Financial emergencies come in many shapes and sizes. Perhaps your car breaks down, and the repairs you need to get it back on the road are expensive. Other financial emergencies could stem from a job loss, an illness, a funeral, or any number of unexpected circumstances. If you’re facing one of these situations without enough savings to get through it, you may need to borrow money in a hurry. You may need an emergency loan. 

Finding the right loan can be stressful when you need fast access to cash, but if you have the added complication of bad credit, getting an emergency loan may seem hopeless. Thankfully, that’s not the case. You may still have emergency loan options even when you have credit problems. 

Best Emergency Loans for Bad Credit

Lender Best For APR Range Minimum Loan Amount Maximum Loan Amount Terms Credit Score Needed
Rocket Loans Fast Funding 7.161% to 29.99% $2,000 $45,000 30 or 60 months 580+
Avant Best for Repayment Flexibility 9.95% to 35.99% $2,000 $35,000 24 to 60 months 600+
PenFed Best Credit Union Emergency Loan 6.49% to 17.99% $500 $20,000 Up to 60 months 580+
LendingClub Best Peer-to-Peer Emergency Loan 10.68% to 35.89% $1,000 $40,000 36 or 60 months 600+
Local Credit Unions Best Payday Alternative Loan Up to 28%   Up to $2,000 One to 12 months N/A
Loan amounts, APR, and repayment period may vary by loan purpose or type.

Rocket Loans: Fastest Funding

Rocket Loans

Rocket Loans, a sister company of Rocket Mortgage by Quicken Loans, offers fast funding options to qualified applicants. Among lenders that provide personal loans to credit-challenged borrowers, Rocket Loans has a competitive starting annual percentage rate (APR) of 7.161%. However, depending on the condition of your credit, along with other factors, you may not qualify for the lowest advertised rate.

Pros
  • Same-day funding available, depending on the time of day you complete the new loan process

  • Prequalification process — check loan options with a soft credit check

  • Lower maximum interest rate than other bad-credit lenders

  • Higher loan amounts available compared with some other lenders

Cons
  • Upfront origination fee applies to every loan, ranging from 1% to 6%

  • No joint loan applications

  • Limited repayment terms available

Other important information:

  • Maximum/minimum amount you can borrow – $2,000 to $45,000
  • APR range – 7.161% to 29.99%
  • Terms – 30 or 60 months
  • Recommended minimum credit score – Reported to be 580 but not confirmed on website
  • Time to receive funds – Potentially same-day funding

Avant: Best Repayment Flexibility

Avant

Avant offers the best overall online emergency loan to bad-credit borrowers. Not only may you be able to borrow up to $35,000 with a credit score as low as 600, but your loan proceeds may also show up in your bank account within one business day of approval. The APR on personal loans starts at 9.95%, which isn’t the best personal loan offer you’ll find online, but it’s not bad compared with other lenders that cater to consumers with credit challenges.

Pros
  • Prequalification option available

  • Lender reports accounts to the credit bureaus, so responsible repayment builds your credit

  • No prepayment penalties for paying off your loan early

Cons
  • Higher interest rates than other lenders

  • Upfront administrative fee of up to 4.75% may apply

  • Lower maximum loan amount than other lenders

Other important information:

  • Maximum/minimum amount you can borrow – $2,000 to $35,000
  • APR range – 9.95% to 35.99%
  • Terms – 24 to 60 months
  • Recommended minimum credit score – Per Avant, at least 600 for most applicants
  • Time to receive funds – Possibly as soon as the next business day

PenFed Federal Credit Union: Best Credit Union Emergency Loan

PenFed Credit Union

PenFed Credit Union offers affordable personal loan options when you need to borrow money for an emergency expense. Loan APRs start at just 6.49% and max out at 17.99%. On top of this competitive APR range, the credit union charges no origination fees on personal loans.

Pros
  • Low loan amounts available, as little as $500

  • Co-borrowers allowed, but exercise caution

  • Limited fees — no origination fees, application fees, or prepayment penalties

Cons
  • Only PenFed members allowed to borrow

  • $20,000 maximum loan amount low compared with other lenders

  • No prequalification option available, meaning a mandatory hard credit inquiry

Other important information:

  • Maximum/minimum amount you can borrow – $500 to $20,000
  • APR range – 6.49% to 17.99%
  • Terms – Up to 60 months
  • Recommended minimum credit score – Reported to be 580 but not confirmed on website
  • Time to receive funds – Possibly by the next business day

LendingClub: Best Peer-to-Peer Emergency Loan for Bad Credit

LendingClub

LendingClub is a peer-to-peer lending marketplace that was established in 2007. Through LendingClub you may be able to find personal loans for up to $40,000 that you can use in a financial emergency. If you don’t want to borrow money from a traditional bank or an online lender, this alternative may be worth considering.

Pros
  • Co-borrower allowed, but consider the risks first

  • Prequalification option available

  • Low minimum loan amount of $1,000 available

Cons
  • Origination fee of 2% to 6% taken off the top of your loan

  • Untimely funds acquisition of four days

  • Limited repayment options available

Other Important Information:

  • Maximum/minimum amount you can borrow – $1,000 to $40,000
  • APR range – 10.68% to 35.89%
  • Terms – 36 or 60 months
  • Recommended minimum credit score –Reported to be 600 but not confirmed on website
  • Time to receive funds – Usually around four days

Local Credit Unions: Best Payday Alternative Loans

You may be tempted to turn to a payday lender in a financial emergency, especially if you have bad credit. Still, even with major credit problems, predatory payday loans aren’t the only option. Many local credit unions offer a product known as a payday alternative loan (PAL). These small loans, which come in a PAL I or PAL II version, are regulated by the National Credit Union Administration and may be available for amounts of up to $2,000. 

Pros
  • Maximum interest rate of 28% versus payday loan’s typical 400%

  • Affordable application fee at $20

  • No extra fees or additional funds for loan rollovers

Cons
  • Low maximum loan amount ($1,000 for PAL I and $2,000 for PAL II) may not be enough

  • May need to become a credit union member to qualify

Other important information:

  • Maximum/minimum amount you can borrow – Up to $2,000
  • APR range – 28% maximum 
  • Terms – One to 12 months
  • Recommended minimum credit score – No credit check for many credit unions
  • Time to receive funds – Varies by credit union

What Is an Emergency Loan?

An emergency loan is a term that describes several different ways you may be able to access cash for sudden, unexpected expenses. A common type of emergency loan (and often one of the most affordable options) is a personal loan, but an emergency loan may come in the form of a credit card cash advance, payday loan, payday alternative loan, or even a loan from a friend or family member. 

Can I Get an Emergency Loan With Bad Credit? 

Borrowing options do tend to be more limited when you have bad credit. Still, that doesn’t mean you’re automatically out of luck. You may be able to qualify for an emergency loan even if you have bad credit. 

It is important to have realistic expectations when trying to borrow money with credit challenges, especially where cost and borrowing limitations are concerned. Due to the fact that there’s more risk involved for the lender, emergency loans for bad credit can be expensive. 

Higher APRs and fees are common with bad-credit emergency loans. And as a bad-credit borrower, you may not be able to borrow as much money as someone with a good credit history. On the bright side, there are smart strategies you can use to improve your credit rating over time. 

Where Can You Get an Emergency Loan With Bad Credit? 

There are multiple types of lenders that offer emergency loans for bad credit. Some of the most common options include: 

  • Online Lenders
  • Credit Unions
  • Traditional Banks
  • Credit Card Companies (Cash Advance)
  • Relatives and Friends
  • Payday Lenders

Remember, just because a borrowing option is available doesn’t mean that it’s a good choice. Credit card cash advances, for example, are notoriously expensive and might damage your credit score by driving up your credit utilization rate

You should also avoid payday loans and title loans whenever possible. The Consumer Financial Protection Bureau (CFPB) warns that the average two-week payday loan features a steep APR that’s equivalent to nearly 400%. 

Will an Emergency Loan Impact My Credit Score? 

Some types of emergency loans can affect your credit score, while others will not. Whether one does depends primarily on if it shows up on your credit reports with Equifax, TransUnion, or Experian.

If a lender doesn’t report your account to the credit bureaus, the loan won’t influence your credit score (unless you default and a collection agency adds the bad debt to your credit reports at a later date). However, if a lender does share your account details with the credit bureaus, that’s a different story.

Banks, credit unions, and online lenders commonly report account details to the credit bureaus. Payday lenders and title lenders generally do not.

When a lender reports an emergency loan to the credit bureaus, the way you manage the account dictates whether it will help or hurt your credit score. If you make all of your payments on time, the account may benefit your credit score in the long run. However, should you make late payments or become past due on your debt, that same emergency loan could hurt your credit score instead. 

How Should You Choose an Emergency Loan? 

When a lender receives a loan application, it generally starts the consideration process with some research. By checking your credit report and score, the lender can weigh the risk of taking you on as a customer. 

Likewise, you should do your own homework anytime you’re thinking about taking on a new debt. You should always review the pros and cons of any financing option before you borrow money—even in an emergency. 

Before you choose a bad-credit emergency loan, here are some important questions to ask:  

  • Can I afford a new monthly payment? 
  • Does this lender offer loans to borrowers with bad credit? 
  • What does the lender charge for emergency loans (APR range)? 
  • Are there additional fees I should be aware of? 
  • How long will I have to repay the loan? 
  • Is there a prequalification option to check my potential rate and loan offer in advance? 
  • How soon will I receive the funds if I qualify? 

Repeat the questions above as you research multiple emergency loan options. Even when you’re in a rush, it’s best to compare several lenders to make sure you’re getting the best deal for your situation. 

How Fast Can I Get an Emergency Loan? 

When you need an emergency loan, you usually must access cash in a hurry. Thankfully, there are numerous lenders that offer fast funding to qualified borrowers. Some personal loan lenders may even deposit the funds into your bank account the same day you’re approved for financing. 

On the other hand, loan funding can sometimes take several days or even up to a few weeks. Certain lenders may take longer to process your loan application or release your funds than others. There’s also a chance that your personal bank or credit union may hold the funds a lender deposits into your account for a few days before you can access the money. 

How Can You Prepare for an Emergency Expense? 

A Federal Reserve study revealed that 40% of adults didn’t have the cash to cover a $400 emergency expense, so if you currently don’t have money set aside to handle unexpected expenses, you’re far from alone. Creating an emergency fund now is the best way to prepare for surprise expenses in the future. The following five tips can help you get started. 

  1. Track your spending – Challenge yourself to record every dollar you spend for a month, including small cash purchases. 
  2. Create a realistic budget based on your monthly bills and spending habits You can use convenient budgeting software or even a simple pen and paper to get the job done. 
  3. Find ways to cut your current expenses – As you free up extra cash in your budget, you can use it to pay down debt (creating even more opportunities for savings) and to save. 
  4. Open a separate, dedicated savings account to tuck away money for emergencies High-yield savings accounts can help your money grow faster. 
  5. Make a habit of saving some money every pay period – Remember, it’s fine if you need to start small. 

Are There Alternatives to Emergency Loans? 

Emergency loans can offer you much-needed relief in certain situations, yet taking on more debt might not be the best solution if you’re already struggling financially. Before you fill out a new loan application, examine your budget and make sure you can afford the monthly payments. If you think an additional debt is going to overextend you financially, an alternative approach might be a better choice. 

Emergency Loan Alternatives

  • Try to negotiate adjusted hardship payment plans with your creditors. 
  • Temporarily consider making minimum payments on your credit cards to free up extra cash. (This should only be a short-term approach and not an ongoing habit.) 
  • Ask your employer for a paycheck advance. 
  • For small emergencies, consider a paycheck advance from Earnin or similar services. 

Note that some employers offer 401(k) hardship withdrawals to help employees meet immediate and heavy financial needs, but you should always proceed carefully and consider the consequences before tapping into your retirement savings. 

The Bottom Line 

Facing an emergency expense without the funds to cover it can be a stressful experience. If you have bad credit, which makes borrowing money more difficult and more expensive, you may feel even more hopeless. The best thing you can do in this situation is to take a deep breath and consider the options that are available to you. 

If you decide to borrow money, compare multiple emergency loan offers to make sure you find the best solution for your situation. Then, once you recover, make a plan to put yourself in a better position in the future. You can work to build an emergency fund (slowly, if necessary) and improve your credit. Both of these moves can help you the next time unexpected expenses strike. 

Methodology 

Investopedia’s mission is to provide our readers with unbiased, comprehensive financial product reviews they can trust. We’ve researched dozens of personal loan options and compared interest rates, fees, qualification requirements, and other features so we can share some of the best offers currently available with you. Our goal is to provide you with the knowledge you need to make well-informed decisions when you’re ready to borrow.

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Article Sources

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  1. Consumer Financial Protection Bureau. "What is a payday loan?:Costs of a payday loan." Accessed Aug. 27, 2020.

  2. U.S. Federal Reserve. "Report on the Economic Well-Being of U.S. Households in 2017, May 2018." Page 2. Accessed Aug. 27, 2020.