How to apply for a hardship personal loan

Financial hardship can hit anyone. Hard times happen, and reaching out for help is a strong, practical step forward. If you’re facing a setback or unexpected expense, a hardship personal loan may be one option worth exploring as you work toward steadier ground and a little more peace of mind.

Hardship personal loans come from private lenders and aren't the same as hardship programs. If you meet the lender's requirements, you can borrow a lump sum of money to get you through tough times.

Not sure if you're eligible—or even how to find out? This guide will explain how to find and apply for an emergency hardship loan, plus offer alternative options that might suit your situation better.

What is a hardship personal loan?

Hardship personal loans are intended to help you get through a period of financial difficulty, such as unexpected medical bills or job loss. You apply for a hardship loan as you would any other personal loan. 

Hardship loans typically tend to be for smaller amounts than other personal loans because they’re intended to help you deal with a temporary setback. These loans also have shorter repayment terms. Because they are for smaller sums and have shorter payoff times, they can also be easier to qualify for since the lender isn't taking on as much risk. 

If you are approved for a hardship personal loan, you'll receive a lump sum of money to use as you need. Then, you'll repay the loan on a set repayment schedule, with interest.  

How is a hardship program different from a hardship loan?

Emergency hardship loans from personal loan lenders differ from other hardship relief options. Most of these require you to meet strict criteria for financial hardship. For example:

• Hardship withdrawals from 401(k) accounts and 401(k) loans let you take money from your retirement savings to cover specific financial hardship situations.

• Employer hardship programs or loans are offered through your employer and may or may not have interest or other fees. Federal employees, for example, may be eligible for help from the Federal Employee Education and Assistance Fund, or FEEA.

In most cases, a hardship personal loan won't have financial hardship requirements or restrictions on how you can use the money. With a hardship personal loan, you typically:

• Find a personal loan lender offering loans with terms that fit your needs and budget

• Apply using the standard loan application process for personal loans

• Use the money to meet your needs, including covering everyday expenses as you cope with financial hardship

Who qualifies for a hardship personal loan?

Here are some situations that could qualify for a hardship personal loan:

• Severe illness or other medical emergency

• Surviving loved ones coping with an unexpected death

• Victims of a natural disaster who experienced financial loss

• Job loss or drop in income

• Drivers who need emergency car repairs 

Even if you're facing hardship, you still often need to meet the lender's standard requirements for getting a personal loan. Typically, you’ll need to provide the following to determine if you qualify:

• Your credit score

• Income verification as lenders want proof of your ability to pay

• Your debt-to-income ratio (debt payments relative to earnings)

In some cases, you may need to submit proof of your hardship, though that will vary a lot by lender and loan.

Most lenders, even those offering hardship loans, want to make sure you have the means to repay the debt. If your financial hardship includes a loss of income, you may have to shop around more to find a lender willing to lend you money.

Documents you may need to apply

When you apply for a hardship personal loan, you will need to provide certain documents as part of your loan application. Getting these documents ready in advance could speed up your timeline for getting a personal loan by minimizing delays.

Here’s what you may need to include:

• Government-issued ID

• Proof of income

• Bank statements

• Employer contact information

In addition, you may be asked to show documentation of your hardship, such as a layoff notice, medical bills, or denial of unemployment. Your evidence should detail how your income or expenses have been negatively impacted. 

How to apply for a hardship personal loan in 4 steps

Here are some simple steps to know about to complete the application process for a personal loan: 

1. Determine how much you need to borrow. Borrow only the minimum you need to get through your financial difficulties.

2. Gather documents. Your application process could be a little smoother if you have the required information ready for the lender.

3. Compare loan offers. Look at interest rates, repayment terms, and any origination fees to find a loan that’s as affordable as possible and with a monthly payment that fits your budget. Use prequalification to get quotes without impacting your credit score.

4. Submit a free loan application. You can often apply online for most hardship loans, though you may need to visit in person if you're using a local credit union or regional bank.

Once you have submitted your application, your lender will review it and let you know whether your loan has been approved or denied. If approved, funding is often within a few business days, though it could take longer with some lenders.

Where to get a hardship personal loan

While a few lenders may have specific hardship loans, most people use a regular personal loan to cover costs during a hardship situation. Some common places to get a personal loan include:

• Online lenders. Shopping loans online lets you easily compare rates, and the application process could be easier than applying in person.

• Credit unions and community banks. Credit unions are member-owned and often have a relationship with their members, so they may be more willing to work with those who need help.

• Nonprofit lenders, which are usually run by community or faith-based organizations. For example, the Jewish Free Loan Organization offers zero-interest, zero-fee loans to struggling families in a few California counties. You can search for programs like this in your local area. 

• Employer-based hardship loan programs, including employee assistance funds, which some large employers offer. Employers and sometimes other organizations donate to these funds, which may be administered by non-profit partners to provide anonymity for workers. Employee assistance funds make grants or interest-free loans available to employees with documented hardships. 

Employer-based hardship loan programs will usually have different qualifying criteria and a different application process. Talk to an HR representative at your company about how to apply if you are interested in this type of loan and your company offers one.

How long does approval and funding take?

The timeline for loan approval varies by lender. You may get approved quickly—either instantly or within a few hours—or it may take several days to get loan approval. Many hardship loans are approved fairly quickly since the amounts are lower than typical personal loans and the loans are intended to help someone facing an emergency. 

Some lenders also provide fast funding, making money available as soon as the day you're approved. Others could take several days to a week or more to deliver the funds to your bank account.

Alternatives to hardship personal loans

Before you take out a personal loan, it is worth looking into other options that don't involve borrowing. Some of those options include:

• Government hardship programs. The government offers benefits including the Supplemental Nutrition Assistance Program (SNAP), Temporary Assistance for Needy Families (TANF), and rent assistance. Benefits.gov is a good place to find out what benefits you may qualify for. 

• 401(k) hardship withdrawal. You may be able to withdraw money from your 401(k) if you have an immediate, heavy financial need and your company plan allows hardship withdrawals. You may owe taxes on the withdrawal. Consult a tax professional to learn more.

• Payment plan with creditors. Your creditors may be willing to pause payments, lower your rate, or otherwise help you work out a plan if you are facing demonstrable financial hardship. 

• Nonprofit assistance programs. Some nonprofits offer help to those facing hardship. Religious and community charitable organizations in your area may provide support. 

• Utility hardship programs. Utility companies, like the water and electric company, usually have special programs to reduce costs or spread out payments when you are struggling to pay.

Most of these options will require you to demonstrate financial need. This could mean showing the cause of your hardship, such as medical bills or a termination notice from your job.