(Revised May 2025)

What are the causal effects of emergency credit on households’ finances after a negative shock? We link U.S. Federal Disaster Loan application data to applicants’ credit records before and after a natural disaster. Using an instrumented difference-in-differences research design exploiting a discontinuity in underwriting, we find that credit provision significantly reduces severe financial distress. We explore mechanisms using additional quasi-experimental variation in interest rates, finding support for a liquidity-based explanation. Disaster loan provision also has real effects in the form of additional car purchases. Well-timed liquidity provided to households in acute need has substantial and persistent positive effects.