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Hardship Loans: 4 Options to Consider, Plus Alternatives

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Hardship loans are a type of personal loan that, in many cases, have more favorable terms: These include faster funding, lower interest rates and deferred payments. They’re especially useful for borrowers during trying times, like the COVID-19 pandemic. Some financial institutions have gone so far as to offer coronavirus hardship loans, which are intended to help families keep up with basic and critical line items — rent payments, utility bills, credit card balances and the like.

If you’re experiencing financial hardship — whether because of the pandemic, unemployment or another unforeseen event — qualifying for a hardship loan or conventional personal loan can be difficult. However, you may have a few options as well as alternatives to tide you over in times of need.

The basics of hardship loans

Before COVID-19, there was really no such thing as a personal loan specifically meant for people experiencing hardship. Plus, getting a loan while unemployed was always difficult, as most lenders want to see proof of income to make sure you can repay the debt.

In recent months and years, however, some financial institutions began advertising coronavirus hardship loans that carried friendlier-than-usual terms, such as faster funding and deferred payments. In January 2022, for example, Focus Federal Credit Union advertised three-year hardship loans for up to $5,000, tagged at 2.75% and featuring a 90-day grace period.

Lent most often by community banks and credit unions, these hardship loans are generally characterized by:

  • Small dollar amounts
  • Low interest rates
  • Short repayment periods
  • Deferred payments

While national online lenders don’t advertise coronavirus hardship loans specifically, it could be worth asking your existing bank or credit union about whether it offers hardship loans. If not, you could always borrow for your hardship in the form of a typical personal loan. Just don’t expect some of the same features, such as relatively low APRs or introductory deferments.

What hardship loans (and personal loans) are commonly used for
  • Basic living costs, like shelter, food and transportation
  • Bills for necessary expenses like health care
  • Other expenditures that couldn’t be planned for or avoided

4 hardship loans to consider

Although not necessarily hardship loans by name, the following four types of personal loans can be used in small-dollar amounts to get past hardships that ail your financial situation.

  1. Bad credit loans
  2. Secured personal loans
  3. Joint (or cosigned) personal loans
  4. Credit union personal loans

1. Bad credit loans

Unsecured personal loans don’t require collateral, and lenders determine your eligibility and interest rate based on your financial profile, including your credit score. However, some personal loan lenders extend their offerings to borrowers with subprime credit.

One caveat: Personal loans can be a costly borrowing option if you have bad credit. APRs are heavily impacted by your credit history, so bad-credit applicants may only qualify for personal loans with high APRs. Since APRs are an annualized measure of the cost of a loan, a high APR makes for an expensive loan.

Personal loans for bad credit
Lending platform APR Loan length Loan amount
Avant 9.95%–35.99% 12 to 60 months $2,000–$35,000
LendingPoint 7.99%–35.99% 24 to 72 months $2,000–$36,500
Upstart 4.60%–35.99% 36 and 60 months $1,000–$50,000

2. Secured personal loans

Personal loans are typically unsecured, but secured loans may be an option for borrowers who wouldn’t otherwise qualify for a loan. Personal loans can be secured by an asset — perhaps a car or money in a savings account or CD. It can be easier to qualify for a secured personal loan, but keep in mind that the lender may seize your collateral if you don’t repay.

Borrowers who are experiencing financial hardship and need a loan may not have money in their savings account to use as collateral. Here are a few lending platforms that let you use your car title as collateral on a personal loan:

Secured personal loans
Lending platform APR Loan length Loan amount
Avant 9.95%–35.99% 12 to 60 months $2,000–$35,000
OneMain Financial 18.00%–35.99% 24 to 60 months $1,500–$20,000
Upgrade 8.49%–35.99% 24 to 84 months Up to $50,000

3. Joint (or cosigned) personal loans

Borrowers with subprime credit who have a spouse or family member with strong credit could consider opening a joint personal loan. It may be easier to qualify for a personal loan, and to qualify for a personal loan at a lower APR, if you enlist the help of a co-borrower.

When you take out a joint personal loan, both parties that sign the loan agreement are responsible for the debt. You’ll want to find someone who can trust you to make payments on the loan, as both borrowers will face the consequences of defaulting on a joint loan.

If you have a creditworthy person willing to help you qualify for a loan — but not directly and immediately repay it — consider personal loans with a cosigner. Just keep in mind that your cosigner would eventually be held legally responsible for repayment in the event you don’t make your payments.

Personal loans that accept co-borrowers
Lending platform APR Loan length Loan amount
LendingClub 9.57%–36.00% 36 to 60 months $1,000–$40,000
Prosper 6.99%–35.99% 24 to 60 months $2,000–$50,000
SoFi 8.99%–25.81% 24 to 84 months $5,000–$100,000

4. Credit union personal loans

Unlike traditional banks and online lenders, credit unions are not-for-profit, member-owned financial institutions. Credit union personal loans may be easier to obtain by long-standing members, even if they have subprime credit.

Check with your local credit union to see if they offer personal loans, or if you qualify for membership at any of the credit unions in the table below.

Credit unions that offer personal loans
Lending platform APR Loan length Loan amount
Alliant Credit Union 10.99%–12.49% 12 to 60 months $1,000–$100,000
Navy Federal Credit Union 7.49%–18.00% Up to 180 months $250–$50,000
PenFed Credit Union 7.74%–17.99% 12 to 60 months $600–$50,000

Also consider payday alternative loans: Federal credit unions may offer payday alternative loans (PALs): These small-dollar loans are worth up to $2,000 with a max APR of 28%, to be repaid in one to 12 months. These loans are regulated by the National Credit Union Administration (NCUA), so ask your local credit union branch if they’re offered.

How to apply for hardship loans

Depending on the lender, applying for hardship loans will likely entail the same process as seeking traditional personal loans.

1. Check your credit score Your credit score and report are the first indicators of your ability to repay your debt. Lenders of hardship loans, though, might be willing to factor in your banking history if your credit or income have been affected by your current hardship.
2. Get prequalified with multiple lenders Prequalification isn’t always possible for hardship loans, but the most reputable personal loan companies offer it. This way, you can confirm your eligibility and receive rate quotes without affecting your credit.
3. Compare your loan offers Hopefully, you’ll have at least a few quotes to compare before choosing a lender. Though APRs are key, look beyond rates and fees to ensure that all aspects of the hardship loan fit your needs.
4. Formally apply with your preferred lender Once you’ve chosen a particular lender, you’ll be asked to verify your information and submit to a hard credit inquiry that could temporarily ding your credit score. Hopefully, you’ll retain the approval you were offered during prequalification.
5. Sign your closing documents Now you’re just a few signatures away from receiving your funds and beginning repayment. Ensure you have a plan in place to keep up with your monthly dues so that the loan helps you overcome hardship without harming your credit report.
For more, check out: How to Apply for a Personal Loan in 5 Steps

See personal loan offers

Alternatives to taking out a hardship loan

Taking out a personal loan isn’t always an option if you need money to tide you over in times of financial hardship. Here are a few other ways to find financial help when you need it:

Apply for hardship programs through your bank or credit union

Many financial institutions offer programs like loan forbearance and fee waivers for customers experiencing financial hardship. If you’re eligible for an emergency assistance program, you may qualify for help when it comes to paying your mortgage, personal loan, auto loan or even credit card.

Hardship programs vary from place to place, so get in touch with your financial institution if you’re having trouble making loan payments or keeping up with your credit card balance. Credit card forbearance could be a good short-term solution.

Coronavirus hardship: For more information about hardship loans or programs offered by banks and lenders amid the coronavirus pandemic, visit

Consider a 401(k) hardship withdrawal

It may be possible to access the funds locked away in your retirement fund if you qualify for a 401(k) hardship withdrawal. Qualifying circumstances include:

  • Medical expenses
  • Funeral expenses
  • Education expenses, like tuition or room and board
  • Costs related to purchasing or repairing a home (excluding mortgage payments)
  • Costs related to preventing eviction or foreclosure

The amount you withdraw is typically limited to what’s needed to cover the expense. You don’t have to repay the withdrawal, but you’ll lose the money from your retirement fund. Plus, you may have to pay income taxes, as well as a 10% early withdrawal penalty if you’re younger than 59 ½.

Download a paycheck advance app

Apps like Earnin give you access to money from your upcoming paycheck based on hours you’ve already worked. So if you’re employed and you simply need a small sum of money to hold you over until your next payday, you could consider utilizing a paycheck advance app.

Most paycheck advance apps offer their services for free and without a credit check, although some charge a monthly fee or request a voluntary tip. There may also be limitations based on where you bank and work.

Paycheck advance apps should be a last resort, not to be used routinely. After all, if you continually need to borrow money before you’re paid, it could mean that your budget needs fixing.

Home equity loan or line of credit

If you’re a homeowner, you could potentially finance your way out hardship by tapping into equity you’ve built up into your property. A home equity loan or line of credit would yield an influx of cash, at the cost of having to add the amount back onto a “second mortgage.”

The negatives of borrowing in this fashion are closing costs and the reality that you could lose your home if you can’t make payments down the line.

FAQs: Hardship loans

How can I use a hardship loan?

Like a personal loan, a hardship loan can be deployed how you see fit. One borrower might use hardship loan proceeds to pay rent to their landlord, for example, while another might catch up on their credit card bills. Using a hardship loan responsibly, of course, ensures that you’ll overcome whatever ails your financial situation and put yourself in a better position to repay your new debt.

Can I get a hardship loan if I am unemployed?

While it’s possible to secure a hardship loan if you’re unemployed, it’s certainly more difficult. Lenders view factors like your credit report and debt-to-income ratio as evidence as to whether you can (or can’t) afford loan repayment. Without consistent income, it could be hard to gain lender approval. With that said, some smaller financial institutions offering coronavirus hardship loans might lean on other factors, like your banking history, if you recently lost some or all of your income. Applying with a creditworthy co-applicant or cosigner could also help.

How large are hardship loans?

Hardship loan amounts run the gamut, from hundreds of dollars to $5,000. These are relatively small-balance loans that can help you handle hardship, get back on your feet and repay your debt on schedule.

What if I can’t qualify for a hardship loan?

If you can’t qualify for a hardship loan on your own, you might enlist the help of a co-borrower or cosigner who is creditworthy. Otherwise, you might rely on alternatives, such as 401(k) loans or home equity loans. For an even shorter-term solution, you could talk to your bank or credit union about its hardship programs or download a reputable app that allows you to advance your next paycheck.

Do hardship loans affect my credit?

Like with other financing options, hardship loans can positively or negatively impact your credit report. Make payments on time, and your credit score should rise. Miss loan payments, and you could be in store for yet another hardship. Before borrowing, talk to your prospective lenders about how they’ll report your loan information to the major credit bureaus.


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