Hardship Loans: 4 Options to Consider, Plus Alternatives

Everyone has difficult financial situations. The coronavirus pandemic, job loss, unexpected expenses, and many other things worsen the financial position. In this case, a financial hardship loan will help. You can quickly receive funds at a low rate and on attractive terms. Thus, you will be able to pay rent, buy food, pay utility bills and pay for a loan. Sometimes it is difficult to issue hardship loans. Therefore, it is worth getting acquainted with all the lending terms and considering alternative financing options.

What you need to know about hardship loans 

Personal hardship loans appeared during the coronavirus pandemic. Many people lose their jobs, and you require proof of income to apply for a loan. Loans for financial hardship were created to help people in difficult situations.

The following distinctions characterize hardship loans for unemployed conditions:

  • a small amount of financial aid;

  • small percentages;

  • short terms;

  • possibility to postpone payments.

Banks very rarely advertise hardship loans for poor credit. But you can ask your lender about such a service. You can also take out a regular loan to fix your financial situation. Consider that the terms will not be so loyal, and you will have to make regular payments.

Borrowers are interested in what is a hardship loan and where they can spend the money. Such loans are usually issued to:

  • pay basic living expenses;

  • deposit funds for bills;

  • pay for unforeseen expenses.

Four types of hardship loans 

You can take out a loan on difficult terms to avoid financial difficulties. There are four loan options:

  • hardship loans for bad credit;

  • secured lending;

  • joint loan;

  • a personal loan from a credit union.

Let's take a closer look at each opportunity.

Loan with bad credit history

Checking the credit rating is a mandatory part of applying for a loan. Hardship loans with bad credit will help in a difficult situation. But remember that you can claim a small amount of money in this case. Also, the creditor can set a high rate because he is taking a lot of risk with his funds.

Collateral loan

A secured loan is a lending option for those who cannot take a conventional loan. You can use any asset as collateral. It can be a house, car, or other property. But keep in mind that in case of non-payment, the creditor can seize the assets.

Joint loan

If you have a husband, wife, or acquaintance with a good credit history, you can involve them in applying for a loan. Having a co-borrower will significantly increase your chances of getting financial aid.

In this case, you and the person who signed the contract are equally responsible. In case of non-payment, the co-signer will be charged with paying the loan.

Credit unions

Credit unions often provide funds to their members. You should contact local organizations and ask for help.

Some federal unions provide payday loans. It's a small amount of money, but it can go a long way.

Issuance of a hardship loan 

Applying for a hardship loan bad credit has no differs from using for a personal loan. You need:

  • check credit rating;

  • apply to several companies;

  • compare available offers;

  • submit a formal application to the chosen creditor;

  • sign the necessary documents.

We advise you to create a loan payment plan. It will help to pay off debts and not worsen the financial situation quickly.

Alternatives to Hardship Loans

To improve your financial situation in a difficult situation, consider alternative options:

  • banking programs in dire straits;

  • advance program;

  • 401(k) loan;

  • real estate loan.

Banking programs are in dire straits

Lenders often go to meet borrowers under challenging situations. You can ask for payment deferral or exemption from payment. It is essential to contact the company in advance and provide documents confirming the problematic financial situation.

Advance programs

Some programs can pay you for hours worked. It is an excellent option if you need payday cash. Most of the applications work without commissions or charge a minimal fee. Besides, they are free. It is an exquisite option if you work officially.

401(k) loan

In some instances, you can take funds from your retirement savings. You can get a loan at:

  • medicine;

  • burial;

  • study;

  • eviction prevention;

  • repair of non-mortgage housing.

You have access to precisely the amount you need to pay for unforeseen expenses. You don't have to repay the money, but the amount in your retirement account will decrease. Furthermore, you will also have to pay 10% of the amount for early withdrawal, if you are under 59.5 years old.

Real estate loan

If you have your own home, you can use it as collateral. On the one hand, this option allows you to get a large amount of money. But if you don't pay the debt on time, you risk losing the property.

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