How to Apply for a Hardship Loan
Understand a hardship loan., Make a budget., Minimize your fixed expenses., Make more money., Meet with a financial advisor.
Step-by-Step Guide
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Step 1: Understand a hardship loan.
If you don’t have a rainy day fund, the thought of paying for unexpected medical bills, car or home repair can cause you to feel powerless.
In some situations, taking out a hardship loan is the best option for paying these unexpected expenses, but in many situations, people who take out hardship loans cannot pay them back and are forced deeper into debt.
Restructuring your expenses to avoid a hardship loan is usually the best option.
If you must take out the loan, ensure you can repay it before agreeing to the terms because while a hardship loan of some kind will give you the cash you need fast, you will often have to deal with negative consequences of such loans in the form of:
High interest rates Fast repayment times Credit score damage Predatory collection practices if you are unable to pay back the loan -
Step 2: Make a budget.
Although taking out a loan to cover expenses is necessary in some cases, it is possible that you can make ends meet by reorganizing your current budget to cut out unnecessary expenses.
To start budgeting and keeping track of your money, here are a few things you may consider:
Tracking your monthly income each month Listing of all of your monthly expenses—usually in the form of fixed expenses for consistent ones (such as rent) and variables expenses for ones that change (such as groceries) Adjusting your variable expenses if you can—eating out less to save money on food, for example, or using public transportation to save on gas , If budgeting and cutting down of variable expenses is not giving you enough income, consider cutting down on fixed expenses where you can.
For instance, lower your monthly rent payment by moving in with relatives or, if you own a home, consider renting out a room to lower your mortgage payment.
Additionally, you can lower expenses such as your phone or cable bill by signing up for a cheaper package through your provider.
If you already have student loan repayments as part of your fixed expenses, you can look into deferring payments on the loans due to hardship.
You can find more information about deferring student loans at:
How to Defer Student Loans. , Before taking out a hardship loan, consider attempting to make more money to cover your expenses.
Maybe you can work more hours at your current job or get a higher paying job.
If you have a skill that you are not currently being paid for, consider doing freelance work or setting up your own business on the side.
For example, you could do yard work on the weekends or babysit at night when you are not otherwise working. , To get more help with your finances, go to a local bank and talk about your finances with a professional.
Usually, a financial advisor can point out areas in your spending that you could improve on, and give you some ideas for saving money.
At your meeting, you can expect to ask most of the questions and control the direction of the conversation.
If you have an account at a certain bank, you can just walk in to any branch of that bank and ask to speak to a financial advisor.
If you do not have a bank account, you can still talk to a financial advisor at any bank for free.
However, the financial advisor may try to convince you that you should open an account with that bank.
To prepare to meet with a financial advisor, write down a list of your monthly income and expenses, and think about your financial goals.
For example, do you want to save more money for a large purchase, or do you need to make sure that you can afford your existing expenses.
The financial advisor might encourage you to use services offered by the particular bank you are at such as checking or savings accounts, loans, or credit cards.
Do not feel pressured to open an account or register for a credit card immediately.
Offers will always be in place for longer than one day, so you can take as much time as you need to consider whether the service is right for you. -
Step 3: Minimize your fixed expenses.
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Step 4: Make more money.
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Step 5: Meet with a financial advisor.
Detailed Guide
If you don’t have a rainy day fund, the thought of paying for unexpected medical bills, car or home repair can cause you to feel powerless.
In some situations, taking out a hardship loan is the best option for paying these unexpected expenses, but in many situations, people who take out hardship loans cannot pay them back and are forced deeper into debt.
Restructuring your expenses to avoid a hardship loan is usually the best option.
If you must take out the loan, ensure you can repay it before agreeing to the terms because while a hardship loan of some kind will give you the cash you need fast, you will often have to deal with negative consequences of such loans in the form of:
High interest rates Fast repayment times Credit score damage Predatory collection practices if you are unable to pay back the loan
Although taking out a loan to cover expenses is necessary in some cases, it is possible that you can make ends meet by reorganizing your current budget to cut out unnecessary expenses.
To start budgeting and keeping track of your money, here are a few things you may consider:
Tracking your monthly income each month Listing of all of your monthly expenses—usually in the form of fixed expenses for consistent ones (such as rent) and variables expenses for ones that change (such as groceries) Adjusting your variable expenses if you can—eating out less to save money on food, for example, or using public transportation to save on gas , If budgeting and cutting down of variable expenses is not giving you enough income, consider cutting down on fixed expenses where you can.
For instance, lower your monthly rent payment by moving in with relatives or, if you own a home, consider renting out a room to lower your mortgage payment.
Additionally, you can lower expenses such as your phone or cable bill by signing up for a cheaper package through your provider.
If you already have student loan repayments as part of your fixed expenses, you can look into deferring payments on the loans due to hardship.
You can find more information about deferring student loans at:
How to Defer Student Loans. , Before taking out a hardship loan, consider attempting to make more money to cover your expenses.
Maybe you can work more hours at your current job or get a higher paying job.
If you have a skill that you are not currently being paid for, consider doing freelance work or setting up your own business on the side.
For example, you could do yard work on the weekends or babysit at night when you are not otherwise working. , To get more help with your finances, go to a local bank and talk about your finances with a professional.
Usually, a financial advisor can point out areas in your spending that you could improve on, and give you some ideas for saving money.
At your meeting, you can expect to ask most of the questions and control the direction of the conversation.
If you have an account at a certain bank, you can just walk in to any branch of that bank and ask to speak to a financial advisor.
If you do not have a bank account, you can still talk to a financial advisor at any bank for free.
However, the financial advisor may try to convince you that you should open an account with that bank.
To prepare to meet with a financial advisor, write down a list of your monthly income and expenses, and think about your financial goals.
For example, do you want to save more money for a large purchase, or do you need to make sure that you can afford your existing expenses.
The financial advisor might encourage you to use services offered by the particular bank you are at such as checking or savings accounts, loans, or credit cards.
Do not feel pressured to open an account or register for a credit card immediately.
Offers will always be in place for longer than one day, so you can take as much time as you need to consider whether the service is right for you.
About the Author
Amanda Wilson
A passionate writer with expertise in DIY projects topics. Loves sharing practical knowledge.
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