Unforeseen occurrences with unexpected expenditures happen occasionally, and we understand that. Emergency loans help individuals to manage their emergency cash needs. However, it is also another way some financial institutions in Ghana help individuals with such emergencies. Also, an emergency cash loan helps customers deal with their short-term cash problems. In this article, we will look at the definition of emergency loans and how to get one.
What is an Emergency Loan?
An emergency loan is a short-term loan you can use to cover unexpected expenses. You need to know how much you need to cover the cost of your vacation. Usually deposits occur within a few days after loan approval. Many emergency fund lenders provide loans on the same day you apply. Most of them are not secure, they do not require collateral.
Meanwhile, some lenders offer secured personal loans that require collateral. Such assets include mortgages, cars, funds and other assets. Credit card advances, payday loans, and cash advances are other options for emergency loans.
Types of Emergency Loans
Emergency loans comprise various types, which include:
1. Personal loans
A number of financial institutions offer secured personal loans which are secured by collateral. Among the collateral includes cars, investment properties, and property. Loans for personal use may also be available with no collateral, such as business loans.
2. Credit card advances
Cash advances on credit cards have higher interest rates compared to regular purchases, as well as fees. Money accrues interest as soon as you take it out. No grace period. However, this increases the amount you will have to pay back.
3. Payday loans
A payday loan is a relatively small, high-interest loan that typically doesn’t rarely require collateral but which you can repay fast. You will need to use your next paycheck to pay back the loan.
4. Title loans
You can take out a title loan if the title to a vehicle you own is worth more than the loan amount. Defaulting on the loan means the lender can have your car.
Uses of emergency loans in Ghana
There are many uses for emergency loans in Ghana, including
- Emergency loans can help you pay for utilities. You won’t have to go without lights and your phone is on more often with an emergency loan. Avoiding late fees will keep you from falling behind on expenditures and keep your credit score steady.
- Medical bills or emergency-room expenses may require an emergency loan to be reimbursed.
- In the death event of a loved one who failed to provide for funeral expenses, you may need an emergency loan. Additional expenses could arise after a person’s passing.
- The only way to survive between paychecks sometimes is to get an emergency loan. A person may face this when unable to pay rent or their mortgage.
- With a home equity line of credit, you can get better interest rates and terms than you would with a personal loan for immediate home repairs. The most inconvenient times are when home or auto repairs occur. If you need to get an auto repair or a home repair, you can’t afford to wait.
When applying for a personal loan, inquire about the terms and any limitations of the potential lender. Several lenders in Ghana prohibit the use of emergency loans for secondary education.
How do I choose an Emergency Loan in Ghana?
It is important not to just choose the first emergency loan lender that appears when conducting your search. It is important to look for the right lender by considering:
1. Financing time
Ideally, one to two days is the perfect time frame. While some lenders take several days to deposit funds, other lenders can do so the same day.
Find out the exact costs that each lender charges by reviewing the fine print. For instance, origination fees and late payment penalties are common emergency loan costs.
3. Requirements for credit scores
Your credit score affects your interest rate and how much you can borrow from the lender. Most lenders have a credit score threshold you need to meet in order to apply for a loan.
4. Interest rates
You may qualify for the lowest interest rate if you have excellent credit. But keep in mind what lenders charge for credit that is less than perfect. Then compare lenders accordingly for the loan you need.
5. Terms of repayment
Do you want to pay your loan back sooner with larger monthly payments? Or do you need smaller payments so you can pay it off? Emergency loan terms differ by lender, although some require repayment of at least a minimum amount each month. Therefore, if you borrow ₵500, you could have a loan for up to a few months.
Where can I access an Emergency Loan?
We can arrange an emergency loan through a credit card store or a payday lending company. The best option for funding a personal loan is a traditional unsecured loan through a credit union, a bank or online lender.
1. Credit Unions
Credit unions offer emergency loans to members who have credit union accounts instead of bank accounts. They are more friendly toward borrowers with fair credit and poor credit.
You may also want to consult other options because some credit unions lend only to members. Also to those that have been members for a certain amount of time. If you don’t meet those criteria or if you are seeking a higher amount of borrowing, then look to other options. Keep in mind, however, that some credit unions will only lend to their own members. In case you cannot meet those requirements, or if you need to borrow more, there may be other options available to you.
A brick and mortar institution may assist you in obtaining a personal loan while you have a traditional bank account.
Banks usually have different processing methods when compared to other lenders. Most banks, for instance, have higher credit scores or income requirements before you qualify for a personal loan. It could take longer than you think to get funds deposited into your account. Therefore, it is important you check the time it typically takes before applying.
3. Online Lenders
Several online lenders offer a wide variety of emergency loans. While most don’t require members or members with a current account to apply. Many offer the option of pre-qualification. This they do to see if you’re eligible for a loan before you actually apply. This way, you can avoid a hard credit check that may hurt your credit.
Many traditional banks also offer online applications and processing if you do not feel comfortable with an online lender. All you need to do is to make sure that it’s a reputable online lender with a secure website.
Note that each lender has different standards and requirements. Therefore, there is a need to review as many as you can before applying for an emergency loan.
Alternatives to Emergency loans in Ghana
There are other options besides emergency loans for borrowing money fast. You may consider these before applying for an emergency loan:
- Getting rid of your high interest credit cards, consolidating your credit cards, or applying for a zero percent balance transfer credit card.
- Repaying a medical bill. Talk to the hospital about setting up a repayment plan that works for you. Some hospitals have interest-free repayment plans, so you can schedule. Several hospitals will settle your bill if you will pay a portion of it up front. By doing this, they will collect payments and keep the rest.
- Accessing your home’s equity through a home loan. They secured these with collateral in your home. HELOC interest rates are typically lower than unsecured loans, while repayment terms are usually long enough to allow you to afford low monthly payments.
In times of real difficulty, encourage your friends and family to lend you a hand. But when this fails or is not available, there are many nonprofits that can help you out financially. Emergency loans are the number one answer. Don’t be afraid to explore all your options before taking out an emergency loan. In an emergency, emergency loans may be a more affordable choice than payday loans, title loans, and credit card advances. By weighing your options, decide on the best course of action.