You’ve found yourself in a true emergency. You need money now, and a loan seems like your best option. Unfortunately, your credit score is quite low — 555 out of 850. Do you have any hope of qualifying for a loan?
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That’s the question GOBankingRates reader Erin posed to our Top 100 Money Experts series.
Luckily for Erin — and anyone in her position — we knew exactly who should answer this question: Prince Dykes, founder of the Royal Financial Investment Group and the Global Children Financial Literacy Foundation, and host of “The Investor Show.” He’s helped people at various stages of their financial journeys attain greater security and independence.
“Emergency situations don’t mean you’re out of options, but they do shape which lenders may help and under what terms,” he explained.
In addition to answering Erin’s question, Dykes also offered a practical guide for navigating immediate financial needs while starting to rebuild credit.
1. Look at Secured Loans or Credit Unions
Dykes suggests Erin investigate secured personal loans, which use an asset — such as a car or savings account — as collateral. By adding collateral, she can improve her chances of qualifying, but it’s not without risk.
“These often have better terms than unsecured ‘bad credit’ loans but carry the risk of losing the asset if you default,” he said.
If she can’t put up collateral, Erin could also consider going to a credit union. Dykes said credit unions may be more likely to approve unsecured loans or payday alternative loans (PALs), which often have far lower rates than payday lenders. However, availability varies by credit union and location, so Erin should do her research.
Read More: 4 Moves To Make If You Can’t Pay All Your Bills This Month
2. Find Alternatives to High-Cost Payday Advances
Dykes cautions against turning to high-interest payday loans. Although these are often marketed as quick and easy emergency cash solutions, they typically come with aggressive debt collection tactics and can trap borrowers in a cycle of debt.
Instead, he recommends looking into local or national charitable organizations and community action agencies that offer essential support, such as:
- Emergency grants
- Food assistance
- Utility support
He noted the Navy-Marine Corps Relief Society (NMCRS) offers interest-free loans and grants to active-duty and retired Navy and Marine Corps personnel and their families. If Erin is eligible, she may be able to use these funds for basic living expenses or car repairs. Other nonprofit and faith-based organizations may also provide no-interest or low-cost emergency loans, depending on eligibility.
3. Improve Your Chances of Loan Approval
While Erin’s credit score is low, that doesn’t mean she has no chance with traditional lenders. It just means she may need to put in more preparation.
Dykes recommends gathering essential documents first, including:
- Proof of identity and residency
- Income evidence (pay stubs, benefits statements, or tax returns if self-employed)
- Recent bank statements
Next, she should build a clear and credible plan for the funds. That includes explaining the emergency, showing how she plans to repay the loan, and including a realistic repayment plan backed by evidence of stable income.
“Lenders prefer a clear, feasible plan,” Dykes said.
He also advises Erin to create a cash-flow plan to demonstrate how she’ll manage essentials like rent, food and utilities while repaying the loan. And when applying, she should stick to a few carefully chosen lenders — too many hard inquiries can lower her credit score and reduce approval odds.
Improve Your Credit Over the Long Term
Even though Erin has more options than she might’ve realized, she’ll likely want to improve her credit score to avoid future emergencies. Dykes agrees this is a wise goal — and offers guidance to get there.
“A 555 credit score and the need for an emergency loan are signals that typically reflect issues built up over time, not something that happens overnight,” he said. “The best approach is to prevent these situations before they arise, rather than merely reacting to them.”
He recommends starting with a detailed budget that tracks income and spending. From there, Erin can adjust her finances to build an emergency savings fund. If her income isn’t enough, she may need to cut expenses or look for ways to earn more — through a second job, a side hustle, advancement at her current job, or finding a new one.
As part of this budgeting process, she should prioritize saving and paying down debt, starting with the smallest balances first to build momentum.
“If you can’t improve income on your own, seek help from a professional financial advisor,” Dykes said. “The overarching goal is to avoid emergencies by planning ahead and managing money proactively.”
Bottom Line
While a low credit score can affect Erin’s ability to get an emergency loan, she still has options. Secured loans, credit unions, and nonprofit assistance may all be viable paths. She should avoid payday lenders and focus on building a strong repayment plan to show lenders she’s a serious candidate.
And in the long run, following Prince Dykes’ advice can help Erin strengthen her finances — and hopefully avoid needing an emergency loan in the future.
This article is part of GOBankingRates’ Top 100 Money Experts series, where we spotlight expert answers to the biggest financial questions Americans are asking. Have a question of your own? Share it on our hub — and you’ll be entered for a chance to win $500.
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This article originally appeared on GOBankingRates.com: 3 Ways To Get Emergency Cash Even With a Low Credit Score
