Emergency Hardship Loans for People with Bad Credit

When you need cash fast for an unexpected expense or other financial difficulties, you may look for an emergency hardship loan, especially if you have bad credit.

What is a Hardship Loan?

A hardship loan is any type of loan that is taken out to pay an unexpected or emergency expense that you cannot currently afford.

Hardship loans are not an actual type of loan, but rather a description of the circumstance when a loan is needed for personal hardship. They come in many different forms: from short-term loans, to payday loans, to 401k loans.

Hardship loans are typically high-interest and high-risk (though not always). Many lenders specifically market hardship loans to customers with bad credit or with low or limited credit scores who often have the hardest time borrowing money in times of need.

5 Types of Hardship Loans

Government hardship loans

The US government offers assistance to qualifying individuals and families for expenses such as medical bills, home energy bills, prescription drug costs, and telephone service.

This government assistance is not necessarily a loan. The US government does not provide cash hardship loans to individuals or families; they are assistance programs for low-income support.

If bills come in unexpectedly high and you qualify for support, the government may be able to assist based on certain qualifications.

Hardship personal loans

Short-term Loans

A short-term loan can be any sort of cash advance that is typically repaid within a few weeks or months. Short-term hardship loans help borrowers address immediate financial needs while repaying the loan with the borrower’s next paycheck or, in some circumstances, at the start a new job.

Payday loans

Payday loans are similar to short-term loans, however, the repayment terms are typically structured around the borrower’s next payday. These are traditionally meant to help borrowers pay bills or other expenses until the next paycheck arrives.

Installment loans

An installment loan is any loan that is paid back through a fixed number of equal payments over a set period of time. A mortgage, for example, is a type of installment loan.

Installment loans are also offered on a short-term basis to borrowers who need cash quickly. They differ from payday loans in the way they are paid back: payday loans require a lump sum repayment that is normally tied to the borrower’s next paycheck, whereas installment loans are paid back in equal amounts over time.

Hardship loans for bad credit

Not all hardship personal loans work for individuals with bad credit. For those with bad credit or limited credit history, the types of loans that will work for borrowers with bad credit include short-term loans, payday loans, and installment loans.

Other forms of loans may not be available without sufficient credit or a certain credit score.

Hardship loans from 401(k)

In limited cases, you are able to make a hardship withdrawal from your 401(k) retirement account. There is an extensive list of criteria for hardship withdrawals from your 401(k) that include the type of hardship and the amount you can withdrawal.

Some of the hardships for which borrowers can take a 401(k) hardship loan include medical expenses, costs related to purchasing a home, tuition and education expenses, and burial or funeral expenses. The amount withdrawn cannot exceed the cost of the hardship.

Any money borrowed from your 401(k) must be repaid in full and is subject to income tax and a 10% early withdrawal fee unless certain requirements are met.

Home equity loans

Home equity loans are a way for homeowners to receive cash up to an amount equal to the amount of equity they have in their home. Under normal circumstances, this cash comes in the form of a lump sum from the bank with a fixed interest rate that must be repaid over time.

Home equity loans are also sometimes referred to as a second mortgage. Second mortgages have traditionally been used to pay off other debt - like credit card debt, student loans, or large medical bills - or for home improvement projects.

It is less common for people to take out a home equity loan to make a large purchase like a vehicle or vacation, although it still happens.

Hardship Loan Alternatives

Many of the hardship loan options discussed above - and especially the hardship loans for bad credit - carry high-interest rates and other debt traps. But there are alternatives to hardship loans:

Credit cards

If handled responsibly, credit cards are an alternative option to hardship loans for unexpected or emergency expenses. They provide an immediate payment option and, since payments are due a month after the statement closes, a defined period of time to find or earn the funds needed for the expense.

Credit cards traditionally carry high-interest rates, so it is advised to always repay your credit cards in full each month.

Peer-to-peer lending

Another alternative is peer-to-peer (P2P) lending. Peer-to-peer lending is the process by which investors fund short to medium term loans for borrowers. These P2P marketplaces are generally more flexible on terms and interest rates than banks given the funds are coming from individual investors instead of a bank or credit union.

Family and friends

Borrowing from family and friends remains one of the best and cheapest options for people who need cash fast. Even if you have bad credit or poor credit history, your family or friends may be willing to offer a low or no-interest rate loan to you.

It’s important to consider making a contract, even if it's informal, so both sides are comfortable with the arrangement. It’s also important to consider the risk to a personal relationship when borrowing money from a loved one.

How to Get a Small-Dollar Hardship Loan from LendUp

Anyone who needs emergency money can apply to LendUp for a hardship loan. LendUp’s hardship loans are an alternative to predatory payday loans. Lendup works with borrowers who have bad credit but structures their loans to contain no hidden fees, roll-overs, or debt traps.

Applying is easy and can be done 24/7 through a quick, online application. A loan decision is almost always made instantly and, if approved, borrowers can receive money in as little as one business day. LendUp also offers flexible repayment options.

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