Also known as payday loans or crisis loans, they are designed to be used for financial emergencies, such as medical bills or urgent repairs that must be fixed immediately.
HSBC doesn’t offer emergency loans. However, if you’re considering a loan to help with money worries, there are other ways we can help you.
People tend to look for emergency loans because they need money quickly on a short-term basis.
Emergency loans are usually unsecured personal loans, meaning you don't need to provide an asset, such as your home, as collateral. However, they tend to have short term repayment plans with very high APRs.
Because of the higher interest rates, emergency loans are not suitable for long term borrowing. They can also have high charges for failure to pay the loan, which can make them even more costly.
Once you receive the money, you’ll need to repay the loan, usually in fixed monthly payments until the loan (and interest) is fully paid off – just like how other personal loans work.
You can find emergency loans online or on the high street from various lenders, including credit unions and payday companies. However, it’s important to ask yourself:
When you need money urgently, getting access to funds quickly can sound appealing. However, you need to be confident that you can afford the repayments. Take some time to understand the terms of the loan and what happens if you’re unable to pay it back.
If you miss a payment or default on your loan, for example, it can lead to fees and charges, which can be high. Applying for an emergency loan can also affect your credit score and your ability to borrow in the future, as it shows lenders that you’re struggling financially.
If waiting until payday or using an emergency fund isn’t an option, you should, ideally, consider alternative ways of borrowing before taking out an emergency loan.
Some alternatives to an emergency loan can include:
Some businesses will let you pay off expenses with a payment plan. You may want to contact the company you may owe money to and see if you can pay off your repairs or bills in instalments.
An overdraft lets you borrow money through your current account, which can be a useful way of borrowing money in the short term. Eligibility criteria apply. Be sure to understand the ins and outs of an overdraft to help you minimise, and even avoid, paying interest.
Some credit cards, such as a 0% credit card can help you cover costs without getting into more debt – as long as you can repay the costs before the interest-free period ends.
A personal loan can be useful when you want to borrow a relatively large amount and would like more time to pay it back. Interest rates are often lower than they would be with a credit card, although they can vary.
Before making any borrowing decisions, make sure you’re aware of all the potential costs and risks. You'll also need to meet any financial eligibility criteria and credit is subject to status.
