4 Loans to Consider During a Recession

When the economy goes into a recession, there can be a lot of negative consequences for people – both mentally and financially. Some workers may be laid off for several months and left without a paycheck to provide for their families. Retirees will grow nervous as they see the investments in their nest eggs decline, leaving them with less money to withdraw for living expenses.

If you’re already living paycheck to paycheck, a recession can worsen an already tense financial situation. Thankfully, you’ve got options for getting the financing you need.

Types of loans to try during the next recession

When money is tight, here are four loans you can turn to for quick financial relief:

Unsecured personal loans

An unsecured personal loan is an installment loan that doesn’t require collateral. Collateral is when you offer something of value to the lender (such as your home or vehicle) to secure a loan in case you default on your repayments. 

Since unsecured loans don’t require collateral, applications can be processed within minutes. After a quick credit check and a few background financial questions, the lender may be able to deposit up to several thousand dollars into your bank account the following business day. 

Installment loans are convenient because the interest is generally fixed. This means you can make the same payments over the next few months to several years, depending on your loan term.

Title loans

Title loans are short-term in-person or online loans offered to borrowers who use the title of their vehicles as collateral. With these loans, you can receive same-day approval so you can get the immediate help you need during a recession. Then, you can keep driving your car as you repay what you owe, while the lender holds onto your vehicle title. But keep in mind that the lender can repossess your car if you fail to repay the loan, so it’s smart to have a repayment plan in place before applying.

Payday loans

A payday loan can help you meet your immediate financial needs during a recession. With these loans, you can get a few hundred dollars to cover expenses when you’re short on funds. Then, you’ll have about two to four weeks to repay the loan plus fees.

Similar to a title loan, payday loans are easy to get and can offer an immediate payout. Borrowers with any credit score can get the funds they need as soon as the same day they apply.

Pawn shop loans

A pawn shop loan is a loan that you can get from a pawnshop in exchange for handing over one of your possessions as collateral. Typically, the pawnshop dealer will offer the borrower a percentage of the item’s resale value. The borrower will then have approximately 30 days to repay this loan, or the pawn shop will become the new owner of this item and resell it.

Which type of loan is right for me?

When the economy is down and finances are tight, it’s good to know you’ve got options. Not all types of loans are the same, so it will be in an applicant’s best interest to consider how much they need, their credit score, and their ability to pay back the loan before making a choice.