If you’re in a financial bind, a hardship loan can help. The key to getting one is knowing what they are, how much it costs and what their advantages and disadvantages are.
What is a hardship loan?
A hardship loan is a relief loan for people who are facing an unexpected financial crisis. These loans may be for people with bad credit, no job, and other issues. If you have an emergency in your life and cannot get a traditional loan from banks or other lending institutions because of your poor credit history or lack of income, these hard money lenders will help you out.
According to financial advisors, Lantern by SoFi, “One feature of a hardship loan that can further help you out is the payment deferral period.”
Do you need collateral for a hardship loan?
You can be approved for a hardship loan even if you don’t have collateral, but your lender may require you to provide other assets. Some lenders will accept stocks and bonds as collateral.
You should also know that some lenders will not accept stocks or bonds as collateral. If this is the case for your lender, then it may be best for you to avoid applying for hardship loans until such time when you do have these assets available to use as collateral.
How hard is it to get a hardship loan?
It can be hard to get a hardship loan if you have a low credit score, no job, and no assets. Hardship loans are designed to help people who are in tough situations like these. They generally require good credit, steady income and a track record of paying bills on time.
There is no set definition of “good” or “bad” debt as it relates to personal finance but many lenders use FICO scores and other factors when deciding whether or not to approve your application for a personal loan. If you don’t have any assets then it’s likely that they will deny your application unless there’s some other justification for giving you the money.
The good news is that even though many people say they need help with their finances most won’t qualify for these types of loans because they either don’t have enough income or have already maxed out their credit cards.
Advantages of hardship loans
There are many advantages to getting a hardship loan. One of the biggest advantages is that you can get one without having to put up collateral or credit. These loans come with flexible repayment options, so you can pay off your debt whenever you want and in any way that works for your budget.
With no prepayment penalty and no hidden fees, these loans are also ideal for those who need quick cash but don’t want to pay more than they have to.
Disadvantages of hardship loans
While these loans can help in a pinch, there are drawbacks to consider. The high-interest rates and fees make these loans expensive, even if you pay them off quickly.
If you’re not able to pay off the debt quickly or if you have trouble making payments on time, it’s likely that your interest rate will increase. If this happens, defaulting on your loan becomes more likely—which could cause further harm to your credit score and financial standing.
If you’re facing a financial emergency and need to borrow money, a hardship loan can be an excellent option. These loans are designed for people who have fallen on hard times and need to pay off debt or cover unexpected expenses.
