Emergency Loans

It can prove challenging to navigate your finances in post-pandemic Canada. For instance, you could make your best effort to save and budget responsibly. Still, emergencies can arise. When they do, you may have considered applying for a loan.

Keep reading for a complete guide to emergency cash loans in Canada today.

When Life Goes Awry

Life can interfere with even the best-laid plans. For example, your car could break down, or you could need emergency medical treatment. Alternatively, you may come up short on your tuition payment. Your home could even get damaged by a natural disaster.

These things are unpleasant to consider. Still, they could happen. It’s these times where an emergency loan can save the day.

About 19% of Canadians said they plan to apply for an emergency loan in 2021. Another 17% of Canadians said that using for one is a possibility.

Have a look at our chart to understand better the distribution of people who said they needed an emergency loan in 2021.

Emergency Loan

How Emergency Loans in Canada Work

Typically, you’ll find out whether you qualify for an emergency loan in Canada near-instantly. You could have funds in your bank in as little as 24 hours. You’d repay the loan each month.

An emergency loan is only for a real emergency. It’s a very short-term loan. Also, it usually comes with a high-interest rate.

A Better Alternative to Emergency Loans

Instead of applying for an emergency loan, it’s better to eliminate the need for one in the first place. You can accomplish this goal with comprehensive financial planning. A good financial plan includes setting aside some earnings into an emergency fund.

You might use a separate bank account for your emergency fund. You can even save your emergency fund in a jar at home. In either case, this fund will help you save for emergencies.

For instance, you may need to pay an insurance deductible after a car accident. Alternatively, you may need dental work that your insurance does not cover. You could even need to hire someone to clear your basement after a big storm or fix a damaged roof.

In all these cases, you’d benefit by saving some money for a rainy day.

Covering Your Emergencies: An Example

Suppose you have a $500 car insurance deductible. Meanwhile, a dental crown might cost upwards of $900. Otherwise, an emergency roof repair might cost $1,500.

You can’t predict what emergencies will arise, but you can try to keep enough in your bank account to cover the most expensive emergency. In our example, that amount is $1,500.

Alternatively, you can save an average amount of all likely emergencies. With our examples, that amount will come to $966.

You’ll have enough to cover the first two emergencies if you do. Still, you’ll also have enough to have most of the money to cover expenses for the worst-case scenario in our example.

Filling up Your Piggy Bank

You may also hear someone call an emergency fund a contingency fund. Either way, this kind of money includes funds set aside for significant, unplanned expenses. It serves as a financial safety net.

With an emergency fund, you can ensure that you have the resources to deal with unexpected situations. Yet, you won’t have to worry about going into debt if something goes wrong. You also won’t have to worry about paying your bills after an emergency.

There’s one point that’s critical to remember, however. Emergency funds are for major, unexpected crises that can affect your quality of life.

Keeping Your Piggy Bank Full

It’s critical never to use your emergency fund for anything except a real emergency. Here, it’s important not to confuse an emergency with long-term savings goals that are reasonably foreseeable. This perspective is critical, even if your long-term goal is essential.

You need your emergency fund to protect you when a real, unpredictable financial hardship arises. However, you must avoid using it for things like vacations and down payments, even if it’s for a car or home.

Likewise, you wouldn’t use your emergency fund to attend a last-minute wedding. You also wouldn’t use your emergency fund to cover credit card debts or gifts for special occasions.

Although these scenarios may cause stress, they’re not emergencies.

The Best Laid Plans…

Remember that $966 in your emergency fund? If an emergency expense arises that costs more, how will you get the rest of the money that you need to recover? This situation is where an emergency loan can help.

Usually, you’d apply for an unsecured personal loan or signature loan in an emergency. However, suppose an emergency arises, and you have less-than-perfect credit and a small emergency fund. In that case, a bank, credit union, or online lender might take a chance on providing you with the added funds you need during an emergency.

Emergency Cash Loans Today

Applying for an Emergency Loan

Most of today’s banks have online applications. You can usually apply for an emergency loan without leaving your home. In this way, you could receive conditional approval for a loan, even before giving the bank your documentation.

If the bank approves your loan, you’ll then need to send information like your pay stubs or T4 slips. You’ll most likely also need to provide the bank with photo identification, proof of address—like a utility bill—and possibly an image of your SIN card.

Going Through the Funding Process

Often, a lender might approve and fund an emergency loan on the same day you submit your application. Otherwise, you might receive approval and funding inside of 24 to 48 hours.

The application process for an emergency loan works the same as if you were applying for an unsecured loan. You must provide the bank with key information. Altogether, this information might include your:

  • Address verification
  • Date of birth
  • Employment information
  • Full name
  • Identification
  • Proof of income
  • Social Insurance Number

The lender will most likely ask you about your expenses like your current debt and monthly mortgage or rent payments. Finally, the lender will check your credit report and score.

They’ll use all this information to determine your debt-to-income ratio. Now, the lender can assess how capable you are of taking on more debt.

The Costs of Emergency Cash Loans Today

Usually, an emergency loan has a fixed interest rate and term. In most cases, the lender will determine your annual percentage rate (APR) based on your credit score. They’ll also use the loan request amount and your debt-to-income ratio to determine your APR.

You’ll receive the most competitive APR, fee structure, and terms at a bank or credit union. And the loan term might last for a couple of months to several years at these institutions.

However, online lenders are less competitive. They have fewer application requirements.

You can apply for a loan from an online lender with average or poor credit. However, they’ll charge a higher interest rate to compensate for the increased risk.

Finding the Best Deal

When applying for an emergency loan, you must shop around for the best deal. Also, whenever possible, you should negotiate your rate with lenders to get the most favourable terms.

You should also try to find a loan without prepayment penalties. Sometimes, a lender will charge a fee if you pay all or part of the balance in advance.

This kind of fee may seem counterintuitive. However, it’s how some lenders make sure that they make a profit, even if you pay off your loan early. With this in mind, you must read the fine print of any loan agreement.

Repaying Your Emergency Loan

Once you receive funding, you’ll repay the loan with monthly payments. Often, a lender will direct debit the payments directly from your account. Alternatively, they may accept automatic payments via direct deposit.

The lender will arrange the payments by asking you to fill out a pre-authorization form. The document will allow the lender to take repayments directly from your account.

Now, you won’t have to make a manual online payment or write a check every month. This process works the same way when you make direct debit payments for other bills and utilities.

Is It Really an Emergency?

You should only apply for an emergency loan if you face a real emergency. An emergency loan is a debt that you must repay.

Even if you have no choice but to apply for an emergency loan, you should do it carefully. You must repay an emergency loan just as you must with any other unsecured loan.

Again, the best thing you can do to prepare for an emergency is to set money to the side. With money in the bank, you can cover emergency expenses or get a good head start on paying them.

How to Get an Emergency Loan

There are times when everyone faces a financial emergency. If you find yourself in an emergency, getting money to deal with it is often a top priority. In that case, you may need to know where you can get emergency cash loans today.

You may already have some options for dealing with a financial emergency. If not, however, it’s important to know where to look, so you avoid high-interest rates and predatory loans.

Let’s look at a few places where you can start your research on getting a loan. The three places to start looking for emergency funding are personal loans, credit cards, and payday loans.

Personal Loans

A personal loan is a form of credit. You can use a personal loan for anything, including an emergency. Depending on your credit, the interest rate for a personal loan can range from the single digits to over 35%.

Some lenders will only work with borrowers who have excellent credit. However, many lenders will work with a borrower with a fair credit history. Also, some lenders offer same-day or next-day funding if you’re approved, especially online lenders.

Credit Card Cash Advance

It’s possible that you can tap into your credit card for emergency funding. Here, you’ll need to see if you can access your credit for a cash advance.

The interest rate for a credit card cash advance varies with credit card providers. However, it can go as high as 25%.

With a credit card cash advance, it’s essential to understand that interest will start to accrue immediately. Therefore, taking a credit card cash advance isn’t like using your credit card to make a purchase, where you get a grace period before interest begins to accrue. Also, credit card companies usually charge an upfront fee representing a small percentage of the cash advance.

Payday Loans

A payday loan is a short-term loan. It is an emergency cash loan today. This kind of loan has an incredibly short repayment term. Usually, you must repay a payday loan in less than 14 days.

Also, payday loans usually have inflated interest rates. On average, the APR for a payday loan can go as high as 400%.

Moreover, it can prove challenging to pay off the loan within 14 days. As a result, many people end up taking out a new payday loan and carrying over the loan repeatedly until they can pay it off while incurring more interest and fees.

In the end, it’s best to avoid a payday loan altogether.

Emergency Loans With No Job in Canada

Suppose you’re unemployed, but you still have some income. In that case, you may still qualify for an emergency loan.

Most lenders require that you have income from steady employment. However, a payday lender may accept another kind of income.

Lenders approve this kind of loan based on other factors like your income source or credit score. As a result, you don’t necessarily need a job to qualify for this kind of loan.

As you can imagine, lenders assume a considerable amount of risk by loaning money to unemployed individuals. Accordingly, they charge remarkably high-interest rates, even compared to payday loans. If you use one of these services, it’s crucial to ensure that you can repay the funds that you receive.

Know Your Money

We hope that our guide on emergency loans in Canada helps you financially prepare for emergencies. Creditpicks is at your service if you want to learn more about managing your finances. Please feel free to visit and subscribe to our blog.

Credit Tips!

Emergency loans should only be taken out if you or your family face dire circumstances entirely outside your control. An emergency loan is still debt, meaning it has to be paid back. So, even if you have no choice but to take out the loan, you should do so with caution as you will be responsible for repaying the loan just like any other unsecured loan.

The best thing you and your family can do is plan for as many types of contingencies as possible. Having cash in the bank will either help you cover the expenses associated with an emergency, or at least give you upfront funds to offset or start paying down any borrowed amount.

As previously noted, if you show financial maturity by establishing and building an emergency fund, financial institutions will always look at this favourably and will likely help you offset any additional emergency costs – even if you have a weak credit record or score. Do not misrepresent your situation in an attempt to take out an emergency loan for other reasons. These are vetted lending facilities, and any falsehoods could be grounds for disciplinary or even legal action by your financial institution.

Emergency Loans With No Job in Canada