Ask Bill your personal finance question

Hardship Loans

Need to apply for a personal loan due to financial hardship? Bills has advice on hardship loans to help you solve your money headaches.

I need to apply for a personal loan due to financial hardship. Where can I go for a hardship based loan?

Read full question
Bill's Answer
4.5
/5.0
(40 Votes)

Updated: Oct 23, 2014

Debt Relief
Highlights

  • Review our 6 tips for hardship based loans and alternative loan products.
  • Look at a refinance loan first, if you own a home, before you explore more costly unsecured loan products.
  • Consider help from a debt relief provider as an alternative to a hardship loan.

Thanks for your question on hardship loans and getting financial help when you are financially struggling.

If you do not have any collateral, what you seek is a signature loan, also called an unsecured loan or personal loan. Personal loans are risky for lenders due to their lack of security and relatively high default rate. Therefore, lenders charge higher interest rates on personal loans, especially those for people with a checkered credit history.

If you own a home with equity, start by seeing if you can qualify for a refinance loan. Refinancing could offer you the lowest costs, especially when interest rates are low. If you don't own a home, or can't qualify for a refinance loan, then examine the different alternative personal loan products, but pay close attention to the costs and the interest rates involved.

Depending on your financial situation, there may be a few alternatives to a traditional personal loan that could assist you in resolving your debt.

Six Hardship-based Loan Suggestions

First, read the Federal Trade Commission document, "Payday Loans Equal Very Costly Cash: Consumers Urged to Consider the Alternatives." You may not be considering a payday loan (I strongly discourage payday loans), but the FTC's suggestions are sound. I recommend reading the document to determine if any of the suggested alternatives to payday loans will work for you. Payday loans are only good as a very short-term hardship loan, when you are certain you can pay it back right away.

Second, consider a loan from Prosper, which is a peer-to-peer lending and investing company. Current rates from Prosper range from 6.73% APR to 34.59% APR, as of February 2014, depending on how Prosper evaluates your credit.

Third, look at Lending Club, another peer-to-peer lender that may offer you a loan. Lending Club interest rates range from 6.78% to 28.69%, also as of February 2014.

Fourth, if you have a 401(k) account, ask your 401(k) plan administrator if loans are allowed under your plan. A 401k loan can offer good rates and does not incur taxes, if you pay it back as agreed. Not all plans allow loans, or limit loans to certain circumstances. I do not recommend taking a hardship distribution from your 401(k), as opposed to a loan, unless you clearly understand the repayment terms and the potential tax implications.

Fifth, visit the Bills.com Bills.com Loan Resources page to learn more about the loan options available to you.

Sixth, if your credit score is not excellent but is improving, look at unsecured loan options from FreedomPlus. FreedomPlus is a new lender that looks at more than credit scores. It's underwriting considers other data, giving borrowers a chance to express their creditworthiness. Loan terms range from two to five years, with a maximum loan amount of $35,000. Interest rates range from 7.49% to 29.99%, as of February 2014.

What if a Loan is Not Right for You?

Hardship loans are not always the best solution, even if you qualify for one. If you are struggling with debt, check out all your debt relief options, including the services of different professional debt relief provider.

You can learn more about debt settlement, credit counseling, debt consolidation loans and all other forms of debt relief at the Bills.com debt relief hub.

I hope this information helps you Find. Learn & Save.

Best,

Bill

Bills.com

30 Comments

Recent Best
1500 characters remaining
  • SM
    May, 2014
    STEPHEN
    I am on Social Security Disability. My wife went through leukemia and I went through prostate cancer. I am really in debt. I have to pay $850 a month and am $25,000 in debt. I own a manufactured home on an acre and a quarter free and clear. Nobody will do a mortgage on it. I can't get a loan. I don't want to lose my home. What can I do? I don't want my credit to take an astronomical hit, but I am almost to the point of not paying my creditors and storing the cash to try to pay one off, then work on the next, etc. I'm really at my wits end.
    0 Votes

    • BA
      May, 2014
      Bill
      Steve, you mentioned that you are concerned about your credit rating, but it could be the case that the debts you are carrying have eroded your score, even if you pay your bills on time. You may find yourself in a situation where it makes more sense to prioritize getting out of debt over harming your score further.

      Here are a few suggestions:
      1. Look at the collection exemptions in your state, to see the homestead exemption. It may be that the value of your home is protected from creditors, even if you were to stop paying them, they sued you, and got a judgment against you.
      2. Speak with a bankruptcy attorney. The fastest and cheapest way to get out of debt could be filing for BK, depending again on how much of your home's value is exempt from creditors.
      3. Speak with a reputable debt settlement firm. Debt settlement can offer the fastest way out of debt at the lowest cost, while avoiding bankruptcy. You could also choose, as you suggested, to try to settle accounts on your own.
      4. If it is credit card interest rates that are making it difficult to pay down your debt, you could benefit from a credit counseling firm's debt management plan, though that approach is not likely to greatly reduce your required monthly payment.
      5. Be sure you understand the level of protection that your disability income has. It is almost surely the case that your creditors could not garnish your disability, even with a judgment against you.
      0 Votes

  • KJ
    Mar, 2014
    kenshaww
    please and please for your own good do your research and choose the right loan, not the first loan, you find.
    0 Votes

  • RB
    Oct, 2012
    Revelita
    I was told not to come to work until further notice due to low census. I was assured I still have my benefits and will be receiving a paycheck but that will come out of my PTO bank which to me is not fair. Is this legal. I do not have enough PTO hours left in my PTO bank, and I was not advised how long this "temporary" set back will last. My question is: Can I apply for hardship loan from my hospital, instead of them exhausting my PTO hrs? Can I draw unemployment,while waiting for my hospital to call me back to active duty(all unit coordinators are in the same situation). Thank you.
    1 Votes

    • BA
      Oct, 2012
      Bill
      If you're asking if you're eligible for a hardship loan on your retirement account, I recommend you speak with the retirement account administrator. To see if you're eligible for any unemployment compensation, speak with the agency in your state that pays out the unemployment checks.
      0 Votes

  • RM
    Feb, 2011
    Robert
    I have been fighting to get diability since "2003" I fianlly won my case and I am expecting a large check. The "IRS" has a judgement against me for $58k for taxes they alledged I owed from 2003..They never contacted me with regard to the above. Yet they managed to seize my bank account and wipe out my entire $40 savings...Yes thats all I had. My question is this, Can I do a bankruptcy to dismiss this or what are my options? I have no assets other then the home I live in.
    0 Votes

    • BA
      Feb, 2011
      Bill
      Regarding bankruptcy, if your IRS debt is related to unpaid income taxes, then there are three criteria for discharging an income tax debt in a bankruptcy:
      1. The taxes must be due for three years
      2. Have been filed for two years
      3. The assessment must be in place for at least 240 days

      Consult with an attorney experienced in tax law regarding your IRS debt and your bankruptcy question. I find it unusual that the IRS surprised you with $58,000 tax bill and a levy of your bank account. Alternatively, consult with a tax debt specialist such as Freedom Tax Relief to learn if an offer in compromise (OIC) is a viable option.

      0 Votes

  • ET
    Jan, 2011
    erika
    I am in the biggest mess of my entire life!!!! I am only 30 as of 3 months ago. Lets jump back 2 years....I'm a licensed sleep technologist, making $25 an hour, owned a house with my fiancee. This was from 2002-2009. Now check out THIS mess! Fiancee went psycho, I had to move to an apartment with my name still on the house. I fell asleep while driving in the parking lot of my apt complex (ironic due to my job i know). I hit the tire of a truck going 15 mph, TERRIBLE I KNOW lol. Since I take xanax AS PRESCRIBED they arrested me for a DUI since you are not supposed to take that while driving. They gave me a breathalizer (it was 0) and a field sobriety test (I passed), but still arrested me. So I had to walk into my place of work (the hospital) in handcuffs to make sure I wasn't HURT (geez) Luckily the prosecutor dropped it down to reckless driving, but they still put me on probation. They took my daughter away to live with her dad. Found out a week later my lab (job) was getting shut down. Applied for unemployment. Since there was a mix up with who knows what I called every week, and was told I might not get my money until september (this was now may). 2 weeks later just after I lost my insurance I found out I had to get surgery!!! In the meantime we are in the process of a THIRD shortsale on the house I own!!! I had to withdraw all of my retirement money just to LIVE ON until I got my unemployment. There are no jobs in my field in michigan. I have applied many other places who say I am overqualified! My PO will NOT let me leave the state until I pay my counseling and other court fines. I couldn't afford my tags on my car, then I couldn't pay my car insurance AND car payment, AND rent, plus now over 10k in medical bills. Then I just got a flat tire LOL. Expired tags, flat tire, no insurance! I'm so screwed lol. I'm actually selling all of my stuff (Wii, couch, TV, armoire, bed set, etc. just to pay bills! I have no where to go....no basement to live in....HORRIBLE credit now so there is no way anyone would accept an app for even a low income studio apt! Now I just got friend of the court papers!!!! AHHHHHHHHHHHH!!!!!!!!!!!
    0 Votes

    • RK
      Apr, 2011
      Rosana
      My dearest Erika, This is late as u wrote in Jan 2011. My only consolation is reaching out to others family or friends, let them know just as u had here. I would get on the internet and find another hospital to work at, VA hospitals are truly "gems" for genuine caring for patients veterans and Im sure this applies to employees, consider moving if it means gaining a job, the VA really uses the internet for job resumes, I believe the website for Government jobs is USA.gov on the site you can make a resume for hard copy but most importantly for downloading to many jobs on the sites. I am a retired vet and am thankful for the philosophy they demonstrate. There are 3 sites for gov jobs.
      0 Votes

    • VM
      Oct, 2011
      Vaughn
      Erika my heart goes out to you. My wife became very ill also about 7 years ago. took 2 years to get longterm disability to agree she was just to sick to work. She didn't get out of bed for 6 years. We also lost everything including our all most perfect credit score. After 2 R9's had been placed against us it took 6 years in canada for them to be lifted and much hard work on our part to slowly see some relief. Keep your chin up not everything is your fault. Also consider going after the insurance company for financial stress they have caused you. Not sure about the US but in Canada you can, now I find this out great. We have 3 children and we all have suffered greatly because of this. But If I could help you I would!
      0 Votes