Hardship loans vs. emergency loans—which one fits your situation?

It's not uncommon to find yourself in a situation where you need money in a pinch. Maybe your roof needs a big repair and you don't have the cash in savings to cover it. Or maybe you're facing mounting medical bills from an injury that's left you unable to work.

In these situations, you may be able to take out a loan to get access to the money you need. And you may be wondering whether a hardship loan vs. an emergency loan is the right solution for you.

Here, we'll review the key differences between hardship loans vs. emergency loans so you can make the right decision.

What is a hardship loan?

A hardship loan is a type of loan geared toward people facing specific financial challenges that make it difficult to cover their essential expenses. It's usually meant to give you access to money during a temporary financial crisis, such as an illness or injury.

It's common for credit unions to offer hardship loans, and some employers have hardship loan programs in place as well. You may also be eligible for a government-funded or community-based hardship loan, especially if you've been impacted by a natural disaster.

You'll generally need to submit proof of an eligible hardship to qualify for this type of loan.

You typically repay a hardship loan in fixed monthly installments over a set term. Most come with interest, and some also charge fees, so know the full cost before you sign.

What is an emergency loan?

An emergency loan is a loan you can get access to quickly to cover an unexpected expense, like a home or car repair. These loans are typically offered by online lenders, banks, and credit unions. Some examples of emergency loans include personal loans and payday loans. A cash advance on a credit card could also serve as an emergency loan.

Here's a closer look at the most common types:

• Personal loans, which are unsecured and usually have fixed monthly payments

• Credit card cash advances, which let you pull cash against a card you already have but start accruing interest immediately

• Payday loans, which can be extremely expensive and have very short repayment windows

Hardship loan vs. emergency loan: What's the difference?

Both a hardship loan and an emergency loan could put money in your pocket when you need to borrow. But there are some key differences between the two.

A hardship loan is meant to give you access to money if you're in a situation where you can't work or can't earn enough to cover your needs. An emergency loan is meant to give you money to cover an unexpected need for cash, like a surprise bill.

Here's an overview of the differences between hardship loans vs. emergency loans.

Hardship loans vs. emergency loans: Which one fits your situation?

Hardship loans and emergency loans ultimately serve the same goal of giving you access to money you need. But it's important to know which one to choose.

You may want to choose a hardship loan if:

• You're experiencing a financial difficulty, like an illness that makes it impossible to work, and you're able to prove it.

• You're in the midst of a tough financial situation that's unlikely to be resolved anytime soon.

• You've been impacted by a natural disaster.

• Getting an affordable interest rate on your loan is more important than the speed at which you get the money.

You may want to choose an emergency loan if:

• You need access to a loan immediately for an expense you can't delay.

• You're able to work and earn money you can use to repay the loan.

• You can qualify based on your credit and income, and prefer fixed monthly payments you can plan around.

Who qualifies for a hardship or emergency loan?

Lenders review a few things when you apply for a hardship or emergency loan. Most want steady income, a manageable amount of existing debt, and a solid credit history. Many also weigh your debt-to-income ratio (DTI), which compares your monthly debt and housing payments to your monthly income.

For a hardship loan, the lender often asks for proof of your situation, such as medical bills or a layoff notice. You could still borrow with fair or lower credit. Fair credit typically means a FICO Score between 580 and 669, though each lender sets its own cutoffs.

It helps to compare lenders that work with a range of credit profiles. Achieve Personal Loans could make a good addition to your list of options.

You could also add a co-borrower or a co-signer to strengthen your application. A co-borrower shares the loan and the money with you. A co-signer promises to repay the loan if you can't, and never receives any of the funds.

How to apply safely and avoid scams

Once you've decided whether you should get a hardship loan vs. an emergency loan, it's important to do your research. If you have access to a local credit union, that could be a first place to start, as a credit union may be able to offer more affordable loan terms. If an online lender fits, consider checking your rate with Achieve Personal Loans as your first stop.

As you shop around for a loan, make sure to read the terms carefully, including:

• What interest rate you're being charged

• How much your monthly payments will be

• How long you'll have to repay the loan

• What fees you'll pay (like an origination fee) to put the loan in place

Also check your loan's eligibility requirements. If you're applying for a hardship loan, find out what documentation you'll need to provide. If you're applying for an emergency loan, check your lender's credit score or income requirements.

You may want to see if you're prequalified for a hardship or emergency loan. That could spare you from applying with multiple lenders and potentially having extra hard inquiries on your credit report, which could lower your credit score.

Also make sure to check lender reviews before signing a loan agreement. And be careful to avoid predatory lenders. They may try to lure you in with the promise of instant approval and tell you no credit check is required. That could leave you paying a very high interest rate on your loan.

Finding help that fits your needs

A loan isn't your only path forward. You could ask creditors or utility providers about payment plans, contact local nonprofit or government assistance programs, or borrow from family with clear terms.

If you need money to address a pressing financial need, the sooner you apply, the sooner you might have that cash in your pocket. Find out if you qualify to see if a personal loan fits your situation.