Before delving into how to obtain emergency loans, the topic of emergency funds should be discussed. It is generally suggested that “the minimum amount in your emergency fund should be three to six months worth of basic living expenses” (About.com, Emergency Funds). The article goes on to say that you must also take into consideration whether or not you “have short- and long-term disability insurance” and “the degree of difficulty you’d have in finding a new job if you lost yours.” These emergency funds should be kept in a separate savings, current, or money market account, so that you are more likely to leave it alone.
If, however, you find saving up for an emergency fund impossible, you need to shift your focus to emergency loans. Liz Pulliam Weston, in an article on msn.money, states that “for most families, the best borrowing for emergencies comes in two forms: credit cards and home equity lines of credit (HELOC).” These types of emergency loans are “readily accessible,” “unlikely to disappear overnight,” and “relatively inexpensive to have and to use.” She warns that “of course, you’ll want to be extremely judicious about how you use your credit” and that you should cut expenses before buying into emergency loans.
A newer and quite popular form of emergency loans is the payday loan. These emergency loans are a service that is provided at outlets or online, which advances money from your next paycheck into your current account within hours. The requirements of Payday Loans UK, for example, are that you earn £750 per month after taxes, you are at least 18 years old, you are currently employed, and you have a bank account set up with direct deposit and a debit card. New customers are eligible to borrow between £80 and £750, once you pass a credit check and meet the previously mentioned requirements. These kinds of emergency loans must be used with extreme caution. For example, the website that offered the preceding information offers no information on the cost of the service (which no doubt exists) or on how and when you must repay these emergency loans. You should never enter into a deal like this without knowing all of this information up front.
In short, you should be prepared for the unexpected… whether by stashing away months’ worth of income or by knowing from where you can quickly obtain emergency loans with the least penalty.