Emergency Loans and Alternatives: 5 Options to Consider

There are five basic options to consider when confronted with a financial emergency:

1. Tap into your emergency fund 

2. Lean on your personal network 

3. Check your insurance coverage

4. Explore other alternatives

5. Seek emergency financial assistance 

What is a financial emergency?

A financial emergency involves unexpected expenses that need to be paid right away. For example, you might return from vacation to find a leaking hot water heater or a burst pipe.

These are not life-threatening emergencies, but you would need to take quick action to stop the leak, make repairs, and clean up the mess. The fix might require more than just paying for a new water heater; it may involve replacing carpeting, flooring, or drywall.

Costs can add up quickly, even if some are covered by insurance. The same may be true for other types of emergencies.

How can you deal with a financial emergency?

When emergencies happen, you often spend time, money, and energy resolving the issue. Once you have cleared up the emergency, you might also find that it has left lingering financial obligations that are not in your everyday budget.

An effective way to handle a financial emergency is to be prepared in advance, especially if the emergency includes loss of property or income. If that happens, paying for everyday living expenses may be difficult.

Here are five financial options you may want to consider to help deal with emergency expenses.

1. Tap into your emergency fund

Many experts recommend building an emergency fund that could cover three to six months of expenses. A robust emergency fund can give you some time to get back on your feet.

If you are facing a financial emergency and you have an emergency savings account, now may be the time to draw from it. If you don’t have an emergency fund, you will need to seek other options. You might also use this experience as a reminder to start saving as soon as you have recovered.

2. Lean on your personal network 

While you deal with an emergency, you may need more than financial support. For example, you might need help with meals or childcare. Just having an attentive ear can sometimes work wonders. Consider calling on family and friends for emotional support and advice. If you are uncomfortable talking about finances with loved ones, remember that most people have faced financial emergencies at some point in their lives.

3. Check your insurance coverage 

Damage to your home, car, or other property may be covered by your insurance policies. Be sure to look them over and talk to your agent or insurance company. You may be eligible for benefits you weren’t aware of, such as rental assistance or temporary living expenses. Taking advantage of what’s available to you may help ease any financial stress. 

4. Explore other alternatives 

Depending on the situation, you may be eligible for government assistance. You may also talk to your creditors to explain your situation and ask for help. You might find some extra cash by rethinking your budget. Every bit of support can make a difference and help you move forward with confidence. The more you understand your situation and your options, the more you may know what to do when a financial emergency arises.

5. Seek emergency financial assistance 

In any emergency, you may need financial help with your situation. There are many options for borrowing funds. If you have time, you might explore the ins and outs of borrowing. If you need money in a hurry, an emergency loan could be a solution.

Four types of emergency loans

An emergency loan refers to a loan you can get quickly. There are several types of emergency loans.

Personal loans for emergencies

A personal loan for emergencies has several benefits and may carry less risk than other kinds of emergency loans. One feature is its flexibility. A personal loan can be used to pay for medical expenses, home improvements, car repairs, and many other unexpected costs. And it may also have a lower interest rate than other types of loans.

With Discover® Personal Loans, you can apply online, and most people get a decision the same day. Because a personal loan has a fixed interest rate and one set regular monthly payment, it’s easy to estimate your payments and see if a personal loan may be right for you—and your budget.

As Shaton, a Discover Personal Loans customer, wrote in December 2024: “Discover made it so easy. I was stressed with financial emergency. They made it easy and got funded quickly.”*

Credit card cash advances

A credit card cash advance lets you borrow money against your available credit limit. While convenient, this method could be expensive.

Some things to consider are that credit card cash advances might not have a grace period. That means you could accrue interest from the date of the transaction. The annual percentage rate (APR) might also be higher than for a personal loan. There may also be a transaction fee. 

Before you choose a cash advance, check your credit limit and review the terms and conditions. How you get cash advance funds will depend on your credit card issuer. You may be able to go to an ATM or to your bank to withdraw your cash.

Payday loans

A payday loan provides immediate cash based on the assumption that it will be paid back when the person receives their next paycheck.

For people with a less-than-ideal credit history, payday loans may be easier to get because they do not usually require a credit check. But these loans can get expensive. They may carry an effective annual interest rate of up to 400%.  And if you don’t have enough money to pay back the full amount, there could be rollover fees.

Those fees, along with higher interest rates, may make it difficult for you to pay back the loan—especially if you are already strained financially. A personal loan may give you the cash you need just as quickly, along with a more manageable repayment plan.

Title loans

A title loan relies on the value of your car to use as collateral. Like payday loans, title loans often come with higher interest rates and are intended to be short-term. If you do not repay a title loan, the lender can repossess your car.

Title loan lenders often insist that borrowers own their cars fully. If you are still financing your vehicle, you might need to explore other options. 

Which emergency loan is best for you?

To know which emergency loan is right for you, you’ll want to do some research. The goal is to compare lenders and loans from several important angles.

Interest rates and eligibility

If you have excellent credit health, you might be able to get more attractive loan terms and interest rates. And if you have a relationship with a lender, that could also benefit you in an emergency. At Discover, we value our customers. 

Total cost of borrowing 

When rates and fees are high, the total cost of an emergency loan may increase. Some lenders charge origination fees, prepayment penalties, and more. With Discover Personal Loans, there are no fees of any kind as long as you pay on time.

Loan amount 

Make sure the loan will be large enough to cover your emergency expenses. At the same time, you will want to avoid borrowing more than you need, because that could unnecessarily increase your interest costs.

Funding time 

In an emergency, it matters how quickly you receive your funds. So it’s crucial to know that you can receive your emergency funds fast. At Discover, funds can be sent as soon as the next business day after your acceptance.

Repayment term 

As you research your options, you’ll want to know how long it will take to repay the loan and whether you can manage the monthly payments. A longer loan may result in lower payments each month. But the extra months might mean you pay more in total interest than you would with a shorter loan, even if the interest rate is higher.

If you have questions about how a personal loan  could help you pay for emergency expenses, Discover is here to help.

Articles may contain information from third parties. The inclusion of such information does not imply an affiliation with the bank or bank sponsorship, endorsement, or verification regarding the third party or information.

*See all Discover Personal Loans reviews.