Your budget is only as good as its ability to handle the unknown. After all, planning for the expected is the easiest part of making a budget. It’s the unexpected bills, repairs, and purchases that determine the true measure of your budget.
Unfortunately, emergencies happen — you may need emergency dental surgery, your furnace can stop working, or your brakes can need replacing. These unpredictable yet unavoidable expenses cost a lot of money, and you might not always have the savings to afford them.
You wouldn’t be the only one. The latest data from TransUnion shows unsecured personal loans are on the rise.
More people are borrowing in tough situations today, and many of them find unsecured personal loans online. Here’s why:
1. Speedy Applications
An emergency earns its stripes because it’s urgent and time sensitive; you can’t delay an important health visit or household repair if it affects your safety.
With such pressure to find fast cash in a hurry, you can’t wait weeks for an advisor to let you know if you qualify for a loan.
Online loans offer a fast and simple application process that you can start any time you need help. These applications are available online 24/7, so you can even send off your information in the middle of the night.
Many online financial services also rely on automation at this stage, which allows them to notify you if you qualify very quickly. In some cases, you may even receive same day direct deposit loans.
2. Convenience
While some people don’t think twice about visiting a local bank branch, others might see this task as a chore. Many rural borrowers don’t have a local financial institution they can rely on in an emergency, so they must travel outside their community to get help.
Travelling to another town may not be possible, depending on your schedule and transportation. Reliable transportation can even be a barrier for those living in urban and suburban areas.
Going online, on the other hand, requires zero travel. You can review and apply for short term personal loans anywhere you get Internet.
3. No Need for Collateral
The “unsecured” in this loan’s name refers to a crucial underwriting step. A financial institution offers unsecured personal loans if they don’t require you to provide collateral.
Collateral is a valuable belonging you’re willing to bet should you not repay your loan. If something stops you from paying your debt, your lender may take your collateral as payment instead. It’s most common with mortgages and title loans.
Unsecured personal loans remove collateral from the equation. Instead, a lender looks at your financial profile to determine your creditworthiness.
4. Variety of Options
Personal loan is an umbrella term that contains many different borrowing options. It covers cash advances, installment loans, lines of credit, student loans, and car loans. This variety is a convenience for borrowers, as you can choose the best option for your emergency.
By going online, you can compare an even greater number of loans and lenders. With the right keyword, you can generate thousands of search results and cherry-pick the best one.
5. Lack of Savings
The biggest reason people rely on unsecured personal loans is that they don’t have enough savings.
Between the pandemic and the rising cost of living, many people can’t put aside money in an emergency fund. According to one study, roughly 20% of Americans used all their savings during COVID. Another study shows nearly three-quarters of Americans can’t keep up with the cost of living.
The Takeaway:
Online and unsecured personal loans are growing in popularity for many reasons, but a lack of savings gives the biggest push to borrow. If you don’t have an ample emergency fund, sit down with your budget to find out how you can start saving every month.
Every little bit helps, even if you can only save $50 to start. These savings will grow every month until one day they might help you handle the unknown, rather than a loan online.
