Business

What Are Hardship Loans?

When you are going through a personal financial crisis, often it seems there is nothing you can do. For example, you might want to consider a hardship loan if you can’t meet your basic needs due to a job loss, medical expenses, rising costs, or other reasons.

Hardship loans

A hardship loan differs from other types of loans because it is designed to help with a specific situation – when you can’t pay your bills. It could be because you’ve lost income, or it could be that your expenses went up.

Either way, you could qualify for a particular loan to temporarily provide you with some breathing room. However, given your situation, there are several types to consider if you decide this type of loan is necessary.

401(k) hardship withdrawal

If your employer allows this feature and you have an immediate significant need, then you might consider this option. However, be aware there are certain limitations. In general, you can only get these loans if you are repairing or improving your primary residence, you face eviction or foreclosure, you have medical expenses, you have funeral expenses, or you are paying for tuition.

Payday loans

This is a short-term option. It works like a cash advance but is also considered a bad option for most people because the fees are excessive. So, for example, taking out a payday loan can put you into a cycle of debt that can spiral out of control.

Loans from credit unions

If you are a credit union member, you can ask them if they offer a PAL. This is a payday loan alternative. It functions like a payday loan, but the costs will be much more reasonable. However, you will need to set up the loan in advance, so it might not be the best option for an emergency.

Applications offering cash advances

Some apps will offer free or low-cost cash advances. You do need to repay the loan on your next payday, but the fees are generally nominal. However, again, you’ll need to set this up in advance.

Home equity loan

If you have home equity, you can take a home equity loan. Many homeowners use this option for home improvements or repairs, but make sure to check out the interest carefully; you will have to pay.

Cash advance on credit cards

This is only a good option if you can pay off the loan by the end of the grace period.

Personal loan

Depending on your credit score, this might be a good option. However, you can often shop around for a reasonable interest rate.

Medical and veterinary care loans

These are specialized types of loans that can help with medical emergencies.

As you can see, there are several options for hardship loans for bad credit. Lantern by SoFi is a great place to check out if you are interested in this type of solution. It’s an online marketplace that provides great business and personal loan information. So, get information about hardship loans today.

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