Loans to Help Pay Utility Bills
Unpaid bills can be a source of great stress. Unexpected expenses can throw even the most carefully planned budget off balance — that’s why many Americans get loans to help pay bills. Losing your job, facing unforeseen healthcare costs, or having a depleted credit card might push you toward getting additional cash.
Our guide looks at alternative financial solutions and support measures to ensure your access to vital utilities. These 'lifelines' are available to all and allow you to maintain access to electricity and water regardless of your credit score.
Table of Contents
- Payday Loans for Bills
- Hardship Loans for Utility Bills
- Paying Bills With Car Title Loans
- Debt Consolidation Loans to Help Pay Bills
- Personal Loans to Help Pay Utility Bills
- Paying Bills Using a Cash Advance
- Payday Alternative Loans
- Government Programs — Low-Income Housing Home Energy Assistance Program
- Home Equity Loans to Help Pay Bills
- FAQ | Loans to Help Pay Bills
Payday Loans for Bills
Payday loans are fast and easy to get — it's a great emergency tool when you need money "here and now". They don't require any type of collateral — they belong to unsecured loans. There can also be payday loans with no hard credit checks, which won't affect your FICO score.
You can usually get up to $1,000 in your bank account with a payday loan. Payday loans have a short lifespan — you must repay your debt in 1 month maximum.
However, everything has its price. Their availability is determined by high cost and large interest rate — in some states, the annual percentage rate (APR) for a payday loan can reach 400% or even higher. Failing to meet the repayment leads to a rollover. This results in the lender imposing additional fees.
Hardship Loans for Utility Bills
In times of financial hardship, taking out a special loan can help keep essential household services running without interruption. This is particularly useful for those who don't have a credit card or have already maxed out their credit card debt.
Hardship loans mirror personal loans but are tailored for bad credit borrowers. They provide reduced interest rates and have brief payback periods but also feature lower borrowing caps (usually up to $2,000).
Hardship loans tend to be available more often at credit unions and smaller financial institutions. They usually require you to prove your challenging living situation to get privileged monetary assistance.
Securing a hardship loan means you can allocate funds to a range of uses, including utility bills, settling other loan balances, or covering everyday expenses.
Paying Bills With Car Title Loans
Car title loans can help pay your utilities or cover medical bills in emergency situations. They belong to secured loans as you provide your vehicle as collateral. These loans are available regardless of your credit score — the loan amount you can get depends on the condition and value of your car (up to 50% of the initial auto price).
However, the interest rates on car title loans tend to be very high (up to 300% APR). If you are unable to repay the debt, the lender has the legal right to repossess your vehicle and sell it.
Debt Consolidation Loans to Help Pay Bills
A consolidation loan allows you to consolidate debt into one manageable loan. It simplifies paying off several smaller debts by rolling them into a single, larger loan that often comes with more favorable interest rates and terms.
This approach not only reduces the number of monthly payments but also streamlines the process, ensuring timely payments thanks to a singular due date. A debt consolidation loan can be used to pay off your utility bills and other debts right here and now.
Personal Loans to Help Pay Utility Bills
Personal loans fit more for larger expenses — they provide manageable interest rates and a convenient repayment schedule. It is wise to take out this loan if you have accumulated a lot of debt (above $1,000) for electricity, water, rent, and other utilities.
Secured personal loans are harder to get since they require a good credit score (minimum 670). A personal loan is repaid in even monthly installments — you can usually choose between a two to five-year loan term length.
If you are eligible for a personal loan, it can also help build your credit score — a higher credit score will open more favorable terms and rates for future borrowings. Be sure to stick to your monthly payments to avoid overdue fees.
Paying Bills Using a Cash Advance
Many opt for a credit card cash advance due to its ease. Use the closest ATM to access funds if you have a credit card — you are free to use this money for anything, including bills and groceries.
This method avoids potential credit score damage from new loan inquiries, allowing you to leverage your current credit line.
Your credit rating limits how much you can borrow on credit cards. Higher credit scores allow for more substantial cash advances. A bad credit score might restrict your access to necessary emergency cash — in these cases, consider alternatives.
Payday Alternative Loans
Avoiding the hefty costs associated with standard payday loans is feasible with Payday Alternative Loans (PALs) from credit unions.
The National Credit Union Administration (NCUA) developed PALs to supply bad credit borrowers with a lower-cost, short-term loan alternative. They allow installment-based repayment plans.
Most credit unions provide payday alternative loans, but you should check their current availability. With PALs, you can get a loan amount of up to $2,000. The loan payment term for PALs is shorter compared to a traditional personal loan — you can get a PAL loan for up to one year at maximum.
Government Programs — Low-Income Housing Home Energy Assistance Program
The Low-Income Housing Home Energy Assistance Program (LIHEAP) grants support to low-income families dealing with hefty energy costs, establishing weatherization, and making energy-related minor home repairs.
LIHEAP also provides aid to vulnerable members of society — disabled individuals, elderly persons, or young children. This initiative is federally funded and managed by states in collaboration with utility companies.
Home Equity Loans to Help Pay Bills
Home equity loans allow you to get a secured loan using your home as collateral. These are taken out in addition to your primary mortgage, enabling the use of your home's value without actually selling it.
A home equity loan can be used to cover medical bills, home renovations, debt consolidation, small business foundations, tuition fee payments, or any large purchases. Yet, caution is necessary as your home backs the loan. The inability to repay could lead to your lender foreclosing on your property.
FAQ | Loans to Help Pay Bills
Can I Get a Loan to Pay My Bills?
Yes, you can use loan funds to cover your bills. Many loans can be used to pay off bills — from payday loans to unsecured personal loans. Choose one based on your needs, capabilities, and credit score.
Is It Smart to Get a Personal Loan to Pay Bills?
It depends on the amount of money you need. Personal loan lenders provide more manageable interest rates and terms, but personal loans are designed for large expenses. Getting a personal loan is wise if your debts and bills exceed $1,000.
Do I Need to Repay a Hardship Loan?
Just as with any form of debt, a hardship loan needs to be repaid. Failure to do so can result in a significant negative impact on your credit score and future borrowing possibilities.
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