When life throws an unexpected financial curveball, an emergency loan can be a lifesaver, especially if you have a low income. Whether it’s a car repair, home repair, or even a pet emergency, a quick loan can help you cover urgent expenses without throwing off your budget.
Key Points
- Emergency loans are small loans that offer quick approval and funding designed to help cover urgent expenses.
- Funds can be used to cover just about any emergency expense, making them highly flexible.
- You can get various types of loans, even with a low income or bad credit.
What Are Emergency Loans?
Emergency loans are small, quick loans designed to cover urgent expenses. They typically offer fast approval and funding, often within the same day, up to 24 hours following application.
There are various types of loans you can get in an emergency, including personal loans, lines of credit, payday loans, and cash advances. Depending on your financial health and loan type you’re looking for, you can apply for an emergency loan with banks, credit unions, and other alternative lenders.
Learn more: Emergency Loans
See How Much You Qualify For
What Kind Of Loans Can You Get With A Low Income?
Low-income families can opt for various types of loans to cover an emergency.
Generally, even with a low income, if your credit score and debt level are fairly good, you can qualify for a loan with a bank. However, if you’re living paycheque to paycheque or have bad credit, you may need to consider alternative lenders, such as credit unions and online private lenders.
Depending on your overall financial situation and credit health, you can apply for one of these loans:
Personal Loans
If you’re looking for a large loan quickly, a personal loan will be your best option. Most lenders offer up to $35,000 with terms up to 60 months. The funds can be used for just about any purpose, making personal loans a flexible financing tool.
The loan is repaid — including principal and interest — in regular installments over the term. Interest rates range anywhere from 9.99% to 35%, on average, depending on your credit score and overall financial health.
Payday Loans
In an emergency, a payday loan can be beneficial due to its processing speed. Many payday lenders provide approval and funding within the same day you apply, given you meet certain conditions.
Moreover, payday loans have flexible requirements, making it easy to get approved. Whether you have bad credit or low income, you can still qualify. That said, payday loans typically have very short terms, high rates, and only offer loans up to $1,500.
Learn more: Payday loans
| Note: While convenient, these loans often come with higher interest rates, so they’re best used as a last resort. |
Cash Advance Loans
- Credit Card Cash Advance – If you have a credit card, you can access funds against your credit account. This is the fastest way to get your hands on borrowed funds in an emergency, since there’s no need to apply for a loan. Do note that interest rates on cash advances can be as high as 29.99%, and interest will start to accrue on the borrowed money as soon as you withdraw it.
- Bree – Bree offers small, short-term cash advances of up to $500, interest-free. You ca use these cash advances to cover unexpected expenses and avoid overdraft fees. There’s no credit check involved, and approval is near instant.
- KOHO Cover – KOHO Cover is a subscription-based product that offers instant, interest-free cash advances of up to $250. It includes perks like financial coaching, a free credit report, and customer support through the KOHO app.
Line Of Credit
| MoneyUp | MoneyUp is an app that offers an instant, interest-free, emergency line of credit called FastForward. You can get approved within minutes, and access up to $1,000 with no credit check required. |
| Nyble | Nyble is an app that offers interest-free credit lines of up to $250, along with credit monitoring and credit-building tools. Once approved, you can get your funds in as little as 30 minutes if you’re a premium member (or up to 3 business days with the free plan). |
Where Can You Get A Loan Quickly?
Filters
- Amount
- Up to $35,000
- Rate
- 9.99% – 34.95%
- Term
- 9 – 78 Months
- Amount
- Up to $60,000†
- Rate
- 19.99% – 34.99%*
- Term
- 6 – 120 months
- Amount
- Up to $10,000
- Rate
- Varies by product
- Term
- Varies by product
What Do You Need To Qualify For A Loan?
Every lender’s application and approval procedure differs in some way. Nonetheless, some general factors that apply to most include:
- Credit Score – Higher credit scores indicate a higher likelihood that you’ll keep up with your payments and pay your loan back in full by the due date.
- Income Level – Most lenders have a minimum monthly income requirement of at least $1,200 to $1,500.
- Employment History – Not only will the lender check your income level, but your employment stability. Generally, lenders like to see that you’ve been employed for at least 3 to 6 months. That said, some lenders don’t require you to be employed so long as you’re receiving income from another source, including pensions or government benefits.
- Debt Level – Your debt obligations can also affect your loan approval. High debt means you’ll have less income left over to handle a new loan. So, you’ll want to ensure your current debt is low.
| Tip. If you offer collateral to secure the loan, it can increase your chances of approval, access a larger loan amount, and even qualify for a lower interest rate. However, keep in mind that if you default on your loan, your lender will have the right to seize your collateral to cover the remainder of your debt. |
How To Get A Loan In An Emergency?
To get a short-term loan quickly to cover an urgent expense, follow these steps:
Step 1: Collect All Required Documents
Lenders require certain types of documents to assess your financial strength and creditworthiness before deciding whether or not to approve your loan application. These may include:
- Employment letter
- Pay stubs
- Tax receipts
- Bank statements
You’ll also have to show a government-issued ID to help the lender verify your identity. To speed up the application process, make sure you have all these required documents ready for submission.
Step 2: Get Prequalified
Prequalifying for a short-term loan will help you understand what types of loans you can qualify for without having to undergo a hard credit check. If you prequalify with multiple lenders, you can compare offers and choose the best option for you.
The quickest way to compare lenders and prequalify is by starting with an online tool like Loans Canada’s CompareHub.
| Note: Prequalifying doesn’t mean loan approval is guaranteed, but it can help you do some comparison shopping without negatively impacting your credit score. |
Step 3: Apply
Once you’ve narrowed down your options, you can apply for your short-term loan. Depending on the lender, you may be able to apply online from wherever you are. This is the most convenient way to apply for a short-term loan and usually results in much faster approval decisions.
If approved, you may receive your funds within a day or two, and often on the same day, depending on when you apply.
Can You Use An Emergency Loan To Tackle Any Expenses?
Yes, you can use a short-term loan to cover whatever expenses you’d like. Here are a few examples of urgent expenses that a short-term emergency loan can cover:
- Repairs on your home (leaky roof, damaged appliances, etc.)
- Repairs on your current vehicle (accidents, mechanical procedures, etc.)
- Medical bills (prescription medication, dental costs, etc.)
- Groceries and other household supplies
- College or university education (tuition, school supplies, etc.)
Alternative Financial Resources You Can Use In An Emergency
If you’re struggling financially and are having trouble covering basic needs, other options may be available to you:
Rent Banks
Rent banks are community-based, non-profit programs that offer interest-free loans or grants to low-income tenants experiencing financial hardship. These programs are designed to avoid eviction, helping individuals and families remain housed by covering overdue rent or rent deposits.
Some examples of rent banks in Canada include the following:
| BC Rent Bank | Learn More |
| Toronto Rent Bank | Learn More |
| Manitoba Rent Bank | Learn More |
| New Brunswick Rent Bank Grant Program | Learn More |
Food Banks
With the rise in cost of groceries, an increasing number of Canadians are relying on local food banks to put food on the table. If you’re having trouble covering your grocery bill, find a food bank near you.
Other Financial Resources
Several financial resources are available across Canada that cover various needs. One quick and convenient way to find these resources is to use www.211.ca, a site that lists community, social, and government services.
Whether you need help with food, housing, utilities, employment, or legal support, you can search the website to connect with local resources across all provinces and territories in Canada to find what you need.
Here’s How You Can Avoid Financial Emergencies In The Future
The best way to deal with a financial emergency is to avoid it in the first place. To steer clear of any financial issues in the future, consider taking the following actions:
Learn To Budget
Having a budget can help you manage your money more effectively and avoid overspending. It involves creating a plan for your income and expenses and helps you prioritize financial goals, like saving, paying off debt, or investing.
To make budgeting easier for you, consider downloading one of the many budgeting apps available, like YNAB, Mydoh, and PocketSmith. Whichever way you create a budget, it will give you more control and clarity in your financial decisions.
Build An Emergency Fund
An emergency fund involves setting money aside for life’s unexpected expenses, like medical bills, car repairs, or sudden job loss. Having quick access to this money means you won’t have to dip in to your retirement savings or rely on high-interest loans or credit cards.
Instead, with an emergency fund, you can deal with urgent expenses confidently, knowing you have the money required and don’t have to touch other accounts.
Learn more: How and Why You Should Start an Emergency Fund
Pay Down Debt And Save – Even On A Low Income
Having high debt increases your monthly bills and interest expenses, leaving little money left over for unexpected costs. Over time, this can lead to a financial emergency if your income drops, interest rates increase, or you suffer a sudden financial crisis.
Even if you earn a low income, there are still ways to save money and pay down your debt:
- Automate Your Savings: By setting up automatic transfers from your bank account to another account, you can take the guesswork out of paying down debt and saving for a rainy day.
- Cut Down On Your Expenditures: Make an effort to spend less on frivolous expenditures by tracking every expense, and prioritizing needs over wants.
- Use the Snowball Method or Avalanche Method: Choose a debt repayment method, like the Snowball Method to pay off your smallest debts first, or the Avalanche Method, which targets high-interest debts first to save the most money over time.
Speak To A Credit Counsellor
A credit counsellor can offer you expert guidance on budgeting, debt repayment strategies, and financial planning based specifically on your situation. They can also help negotiate with your creditors to lower interest rates or consolidate payments. With the support of a credit counsellor, you can steadily pay down your debt and save money over time.
Final Thoughts
Short-term loans can be very useful in emergency situations, or simply for any other time you need a bit of extra funding. However, they can come with high interest rates and may be tough to repay in full given the shorter repayment periods. As long as you’re responsible and are capable of making payments on time, short-term loans can be a helpful tool to cover your financial challenges.
Short-Term Loan FAQs
What interest rates do short-term loans have?
Can I use a short-term loan for emergencies?
Should I get a payday loan?
What happens if I can’t repay my short-term loan?
What is the best way to borrow money in an emergency?
What is the cheapest way to borrow money short term?
®Fairstone Financial Inc. is a wholly owned subsidiary of Fairstone Bank of Canada.
*Interest rates are subject to change. Actual Annual Percentage Rate (APR) varies based on the province of residence and individual factors like credit details and loan amount. The interest rate on an unsecured personal loan is 31.99% in BC.
†On approved credit. Terms and conditions apply. Interest rates vary by province/territory and from customer to customer based on factors like credit score and borrowing history. See Fairstone’s website for details.
Fairstone Financial Inc. holds high-cost credit licenses in AB, MB (License #85047, expiring 20-02-2026) and QC; it has applied for a high-cost credit grantor license in NL. For license information by province, visit Fairstone.ca/HCCG
In Ontario, Fairstone Financial Inc. is licensed as mortgage brokerage 10821.
In Nova Scotia, Fairstone Financial Inc. is licensed as mortgage lender #2021-3000028.
