Hardship Loans: How to Borrow Money During a Financial Setback
A hardship loan can be any funds borrowed during a financial challenge. Compare all options before you borrow.

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Dealing with a job loss, an expensive medical bill or another financial hardship can be a tough situation to weather if you’re already strapped for cash. A hardship loan could help you meet your financial obligations.
But before you borrow, it’s important to compare all your options, since taking on debt can add to your financial burden.
Here are hardship loan options, plus alternatives to borrowing.
What is a hardship loan?
A hardship loan is a personal loan that provides funds to help you get by during a difficult financial time. This loan can help bridge an income gap or cover an emergency.
Personal loan amounts typically range from $1,000 to $100,000 with loan terms from two to seven years. Annual percentage rates (APR) on personal loans range from about 6% to 36%.
Some lenders charge an origination fee, which is calculated in the APR and typically ranges from 1% to 10% of the loan amount. Lenders often deduct this fee upfront, reducing the loan amount you receive.
Qualified borrowers are typically approved within a day or two and receive funds in less than a week, though some lenders offer same- or next-day funding.
Even if you urgently need funds, taking the time to compare loan options could save you money in the long term.
» MORE: Best installment loans
5 hardship loans for bad credit
These five lenders provide loans to bad- and thin-credit borrowers.
» COMPARE: See your bad-credit loan options
Lender | Loan amount | APR | Min. credit score | Min. income requirement |
---|---|---|---|---|
$2,000 - $35,000. | 9.95% - 35.99%. | 550. | $1,200 net income per month. | |
$250 - $50,000. | 8.99% - 18.00%. | Does not disclose. | Does not disclose. | |
$1,000 - $50,000. | 11.69% - 35.99%. | 580. | None. | |
$1,000 - $50,000. | 7.99% - 35.99%. | 580. | None. | |
$1,000 - $50,000. | 6.70% - 35.99%. | None. | $12,000 per year. |
Borrowers with low or no credit scores may qualify for no-credit-check loans or payday loans, however these loans may have triple-digit interest rates and can lead to a cycle of debt. Only consider these options after you’ve exhausted other ways to borrow.
Reasons to get a hardship loan
Hardship loans can be used to cover a wide variety of financial needs. You could use the funds for home or car repairs, medical or dental expenses, funeral costs, emergency vet visits or to cover regular bills during a period of job loss.
There usually aren’t many restrictions for using a personal loan, but you should check with your loan provider if you plan to use the money for education or business expenses.
Qualifying for hardship loans
Your credit score and income are major factors on a personal loan application. However, some lenders look beyond that information and review applicants’ whole financial picture.
Many credit unions and online lenders that offer hardship loans accept borrowers with low credit scores or thin credit histories. It may be difficult to qualify for a loan if you have no income, but some lenders offer low-income loans.
While most personal loans are unsecured, securing a personal loan with collateral may help you qualify more easily or get a better rate. Applying with a co-signer or co-borrower who has stronger credit or a higher income may also increase your odds of qualifying.
How to get a hardship loan
Here are the steps to apply for a loan.
Review your credit. Read your credit report to see what a lender will see when you apply. Most lenders like to see a history of on-time payments to other creditors. Pull your credit reports for free on NerdWallet or at AnnualCreditReport.com.
Calculate your monthly payment. Lenders usually require borrowers to have enough income to cover monthly expenses plus the loan payment. Use a personal loan calculator to see your estimated monthly loan payments based on the loan amount, your desired loan term and your expected rate.
Pre-qualify with multiple lenders. Most lenders let you check your potential rate, term and loan amount by pre-qualifying online. The process typically takes a few minutes and only requires a soft credit pull, which doesn’t affect your credit, so you can pre-qualify with multiple lenders to find the best offer.
Prepare your documentation. Some lenders may require documents to verify your income, like a W-2 or paystubs, as well as an ID and Social Security number. If you plan to include other forms of income on your application, like alimony, child support, a partner’s income or Social Security payments, find documents that can prove you’re receiving those funds. Get these ready ahead of time to speed up the application process.
Submit the application and get funded. Some lenders say they can make an approval decision within minutes, while others take a day or two. If you’re approved, expect to receive the funds within a few days. Once you have the funds, make a plan to account for the payments in your monthly budget.
Alternatives to personal loans during financial hardship
Taking out a personal loan when your finances are already stressed may not be the best option, so consider these borrowing alternatives before applying for a loan.
401(k) hardship withdrawals
If you’ve been contributing to a 401(k), you may qualify for a hardship withdrawal. This type of withdrawal lets you access money you have contributed to the fund.
Generally, expenses such as medical bills, college tuition, money to avoid eviction, funeral expenses and some home repairs qualify for hardship withdrawal. Your plan’s administrator usually decides whether you qualify, and you may have to explain why you can’t get the money elsewhere, such as from a personal loan or the liquidation of other assets.
Another option may be taking a loan from your 401(k). These loans may allow users to borrow up to half of their retirement account balance or $50,000 — whichever is less — for a maximum of five years. Unlike hardship withdrawals, the amount must be repaid. Like early withdrawals, you’ll miss out on potential growth by reducing your investment amount.
Deferment or forbearance on existing loans
One tactic to help ease an immediate financial hardship is to get a temporary reprieve from monthly payments on existing debt, such as student loans, mortgages, car loans or personal loans. Whether you qualify for loan deferment or forbearance often depends on the type of loan and the loan provider.
For student loans, if you meet certain criteria, you may be eligible for student loan deferment or forbearance. For homeowners, mortgage forbearance may be arranged with the provider for a specific period of time.
Friend and family loans
Asking a close friend or family member to lend you money may bruise your ego, but it can also be a fast and simple solution.
A loan from a friend or family member may be the least expensive option, especially if the lender doesn’t charge interest. A friend or relative won’t consider your credit score like a bank or online lender would. But it’s important to set clear expectations. Draw up a contract detailing the loan amount and terms, including when and how often payments will be made and how much they'll be.
Home equity loans and lines of credit
With a home equity loan or line of credit, you borrow against the equity you’ve built. A home equity loan comes in a lump sum with a fixed interest rate, while a HELOC is an open credit line that you use as needed and comes with a variable interest rate.
For home equity loans and HELOCs, you may qualify for loans up to about 85% of your home’s value. Tapping your equity to cover a hardship can be a risky option because you use your home as collateral. That means if you don’t repay the borrowed funds, you could lose the house.
Payday alternative loans
Payday alternative loans, or PALs, are small-dollar loans available to members of some credit unions. These are small, short-term loans — typically up to $2,000 — that can help you pay for small emergencies or unexpected expenses.
PALs are a far more affordable option than payday loans, whose short-term, high-fee loans often trap borrowers in a cycle of debt. PALs have a maximum APR of 28%, while payday loans can approach almost 400% APR or more. Repayment terms for PALs may be as long as 12 months; payday loans often require full loan repayment in two to four weeks.
Cash advance apps
Cash advance apps provide small loans of a few hundred dollars to borrowers with no credit check. Users typically connect a bank account and the app decides how much to advance based on their bank account transaction history.
These apps work similarly to payday loans — you repay the advance, plus any tips and fees, on your next payday — but they may charge lower fees. Loan amounts are typically $500 or less.
Other hardship assistance
Government assistance for people facing financial hardship: If eligible, you could benefit from the Supplemental Nutrition Assistance Program (SNAP), Temporary Assistance for Needy Families (TANF) or other government programs that help people struggling to cover their basic needs.
Help from nonprofit organizations: Nonprofits, charities and religious organizations in your area may have programs that can help you get food, clothing, transportation for job interviews and more. Contact 211 for connection to local resources.
For help with rent or utilities: Contact your utility company, landlord or mortgage issuer for help deferring a payment. If you need long-term help, consider seeking other housing or contacting a housing counselor.
To pay medical bills: Learn about ways to cover medical costs, including payment plans.
To clear unsecured debt: Debt relief can help if your debt has become overwhelming. Learn about the different types of debt relief and their consequences.
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