Can You Apply for a Hardship Loan with Bad Credit?
Some months feel like a game of financial musical chairs, and somehow, there’s always one bill left standing. You cut back where you can, and you juggle due dates.
But sometimes, no matter how carefully you plan, there just isn’t enough.
If that sounds familiar, hardship loans could help you tackle short-term financial issues. Learn how these loans work, what types are available, and how to find support.
What is a hardship loan?
A hardship loan is a type of personal loan that provides financial assistance to cover essential expenses during difficult times. These types of loans can offer a financial lifeline when you're:
- 🏡 Behind on your rent or mortgage
- 🏥 Struggling with medical bills
- 💼 Facing a job loss or reduced hours
- ✈️ Dealing with emergency travel or family needs
- 🌪️ Recovering from a natural disaster or other crisis
Hardship loans can come from various sources, including banks, credit unions, employers, and even government programs. These loans can be secured with collateral — or unsecured, which means the loan is based on your creditworthiness or income.
The goal of a hardship loan is to give you financial breathing room when you're dealing with a short-term setback. They can cover:
- 🧾 Bills
- 🔧 Car repairs
- 🛒 Groceries and household necessities
- 🧑🧑🧒🧒 Childcare costs
- 🌹 Funerals or emergency travel for them
- 📋 Any other necessities needed to get through the hardship
Types of hardship loans
Not all hardship loans are the same. Depending on your employment status, income, credit history, and assets, some types may be a better fit than others.
💼 Employer hardship loans
Some employers offer hardship loans or pay advances to help employees through a financial crisis. These are usually:
- Low or no-interest
- Paid back through paycheck deductions
- Easier to qualify for than traditional loans
Not every employer offers this benefit. But it’s worth asking your HR department or checking your employee handbook to see if it's available.
Many employers are open to helping when they know you’re trying to stay on top of your responsibilities. If you decide to ask for an advance, consider framing it as a short-term solution tied to a specific need and show your plan for paying it back. It can help to put your request in writing and offer a repayment timeline.
🏛️ Government loans
Federal, state, or local governments may offer hardship-related assistance in specific circumstances. These can include:
- Disaster relief (e.g., after a hurricane or flood)
- Federal student loan deferments or forbearance
- Veterans’ benefits
- Temporary housing or utility assistance
These options often have eligibility requirements, so be prepared to provide documentation of your hardship. You’ll need to research your specific state’s hardship loan options and requirements to know if this option is possible.
🔒 Secured personal loan
A secured personal loan requires you to give some kind of collateral to your lender in exchange for borrowing money from them. Collateral can include:
- A car title
- Your savings account
- Jewelry or collectibles
Since there’s less risk for the lender, a secured loan may be more accessible for borrowers with little or bad credit. However, if you don’t pay the loan back, you could lose your car, savings account, or whatever other asset you used as collateral.
➢RELATED: Secured Loans for Bad Credit: Are They a Good Idea?
🔐 Unsecured personal loan
An unsecured personal loan doesn’t require collateral, and this can sometimes make the loan difficult to get. Instead, lenders will look closely at your credit score and income before approving or denying you. If your credit score isn’t that great or your income cannot compensate, you could have a higher chance of getting denied.
These loans may also come with higher interest rates, especially if your credit isn’t strong. But they can still be a helpful option in a pinch.
➢RELATED: Secured vs. Unsecured Loans: Pros and Cons
🏠 Home equity loan
If you own your home and have built up equity, a home equity loan will allow you to borrow against that value. These loans are typically used for large expenses like:
- Home repairs
- Debt consolidation
- Education
- Emergencies
But in some cases, they can be used to cover temporary hardship expenses. With a home equity loan, your house is the collateral. If you can’t make payments, you could risk foreclosure, so it’s important to borrow responsibly.
Requirements to get a hardship loan
Requirements can vary widely by lender and loan type. But in general, you’ll likely need to provide:
- 📄 Proof of income (pay stubs, bank statements, or benefits documentation)
- 📝 A written explanation of your hardship, such as a job loss, medical emergency, or unexpected expense
- 💳 Credit history
- 🏠 Collateral (if you're applying for a secured loan)
Some lenders may also ask for supporting documents to confirm your situation. These can include medical bills, layoff notices, or eviction warnings.
If you’re applying for hardship loans with bad credit, be upfront about your financial situation. Transparency helps lenders better understand your needs.
Hardship loans for bad credit
If your credit score is looking a little lower than expected, you might feel like your options are limited. But you’re not alone, and some lenders do offer hardship loans for bad credit.
Here’s what to keep in mind:
- Look for lenders that specialize in bad credit: Some financial institutions and online lenders focus on helping borrowers with poor credit scores. These lenders may use alternative approval methods that focus on your income or employment status rather than your credit report.
- Consider a secured loan: These loans may be easier to qualify for because they’re less risky for the lender. If you have an asset to offer as collateral, you may get better loan terms, even with bad credit.
- Explore community-based programs: Nonprofits, religious organizations, or local assistance programs may offer small-dollar loans or grants to help people during emergencies. These may not show up on your credit report and often come with flexible repayment options.
- Don’t overlook alternative lenders: Advance America, for example, offers Payday Loans that don’t require a perfect credit score. These loans are designed to help during short-term financial emergencies, and eligibility may be based more on your income and ability to repay.
💡 Tip: If you're searching online, ensure the lender is licensed and reputable. Keep an eye out for red flags like upfront fees or pressure to act quickly.
Loan alternatives during a financial hardship
Taking out a loan isn’t always the right fit, especially when you’re already stretched thin. Maybe you don’t qualify, or the repayment terms feel too risky right now. Or maybe you’re just trying to avoid adding another financial obligation to your plate.
Whatever your reason, needing help doesn’t always mean taking out a traditional loan. There are other ways to access money, reduce pressure, or buy yourself some time.
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💵 Cash Advance
A Cash Advance, such as a Payday Loan, is a short-term, small-dollar loan that you repay in full on your next payday. It’s designed to help you bridge the gap between paychecks, especially when you're dealing with unexpected bills.
Some perks of a Payday Loan include:
- No long application process
- Funds may be available the same day, upon approval
- You don’t need good credit to apply
🏦 Borrow from your 401(k)
If you have a retirement account like a 401(k), you may be able to borrow from it without penalties — as long as you repay the amount within a specific time frame. This option can be quicker than applying for a traditional loan but may affect your retirement savings.
One advantage of this option is that the interest you pay goes back into your own retirement account, not to a bank or lender. But there are also some important considerations. If you leave your job before the loan is fully repaid, you may be required to pay back the remaining balance quickly, or risk having it counted as a taxable distribution.
🤝 Borrow from friends and family
If you have a trusted friend or family member who’s in a position to help, borrowing from them could be a low-cost, flexible alternative to a traditional loan. While asking can feel a little awkward at first, it can save you from going through a loan application process and help you get the money you need faster.
To keep things respectful and avoid tension, it’s important to treat the arrangement like a formal loan. That means:
- Having an honest conversation about your needs
- Setting clear repayment terms
- Putting everything in writing
A written agreement may feel formal, but it protects both sides and helps preserve the relationship.
💰Pick up a short-term side hustle
When borrowing isn’t the right move, earning a little extra on your own terms could help bridge the gap. Short-term gigs or side hustles can provide fast cash without the commitment of a loan or a credit check. Depending on your schedule and skills, you could:
- 🥡 Deliver groceries or takeout through apps like Instacart or DoorDash
- 🦮 Offer pet sitting or dog walking through Rover
- 🧑🍼 Help neighbors with yardwork, babysitting, or errands
- 🧑💻 Take on freelance or remote microtasks through platforms like Upwork or TaskRabbit
Even a few hours a week can bring in enough to cover a utility bill, groceries, or gas. And because it’s money you’ve earned instead of borrowed, there’s no repayment pressure later.
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Notice: Information provided in this article is for informational purposes only. Consult your attorney or financial advisor about your financial circumstances.
About the author
Ashley Masiello is an experienced copywriter and editor who has crafted engaging content for numerous websites and continues to do so with Advance America. She likes to combine her creative personality with clarity to make concepts easy and fun to read.