8 places you can borrow money from

 



Whether you're looking for extra money to consolidate credit card debt, pay a medical bill, or take a vacation, it can be stressful if you don't know what your choices are.




We've rounded up eight different borrowing options, along with the advantages and disadvantages of each.


Let's go through each option so you know what to consider before you decide if borrowing money is right for your financial situation.


8 places you can borrow money from




1. Banks




Getting a personal loan from a bank may seem like an attractive option. For example, some banks offer perks such as no loan origination fees. Set-up fees often range from 1% to 8% - lenders say it covers the administrative expenses of processing your application and paying you the money.


You may also qualify for an interest rate discount - sometimes referred to as a relationship discount - if you are an existing customer of a bank that offers this benefit. Some banks offer loyalty discounts on interest rates on personal loans if you maintain eligible bank accounts.


But keep in mind that some major banks do not offer personal loans at all. Some banks may require you to have a minimum level of good or excellent credit to get approved for a personal loan.




2. Credit unions



Getting a personal loan from a credit union may be a better option than getting a personal loan from a bank. why?


A credit union may offer lower interest rates and fees than the bank. Since credit unions are nonprofit organizations dedicated to serving their members, their goal is to return profits to members rather than shareholders.


One drawback is that you must meet the credit union's eligibility requirements in order to become a member. This can include residency in certain counties, association with a particular school or employer, or family ties to an existing member.


Some credit unions also offer alternative payday loans, which are short-term loans of small amounts designed to help members avoid costly payday loans.




3. Online Lenders



Online lenders do not bear the costs that come with maintaining physical branches. They often provide the user experience that people expect from digital loan applications.


Many online lenders promise fast financing, with the money deposited into your bank account in as little as a business day or two if you are approved.


But if you are not familiar with the lender, research their reputation online and check with traditional lenders to see if they can offer better rates and interest terms.







4. Cash advances



If you need a little cash to get you through a financial emergency or even your next paycheck, a number of companies offer small cash advances that can come in more favorable terms compared to traditional payday loans.


These companies often have mobile apps, and they will offer you up to $500 in the pay period if you meet the qualifications. Some may come with a monthly membership fee, while others require optional tips for using their services.



5. Credit Card Cash Advance



Using a credit card to access cash may seem an attractive option. Since you already own the card, you don't have to fill out an application or do a credit check to get a short-term loan—primarily against the credit limit available on your credit card. In addition, you can usually access the funds quickly.


But the simplicity of a credit card cash advance can come at a price. Some card issuers charge a fee for a cash advance along with a usually high interest rate. Also, most credit cards do not offer a grace period for cash advances, which means that interest charges start from the moment you withdraw the cash.


6. Buy Now, Pay Later Apps



If you are looking to spread out a large purchase over several months, taking out a loan from the buy now app and pay later is another option to consider. These apps partner with retailers and even airlines and hotels to help you finance these items.


Just be sure to take into account any fees you may be charged for late payments - which can also affect your credit score negatively.




7. 401(k) retirement account



If your 401(k) plan allows loans, borrowing money from an employer-sponsored 401(k) does not require a credit check. Traditionally, a 401(k) loan allows you to borrow up to $10,000 or 50% of your earned account balance up to a maximum of $50,000, whichever is greater.


The loan must be repaid within five years, and the interest you pay on the loan is your 401(k).


Although accessing cash from a 401(k) seems simple, consider some of the consequences. For example, if you leave your job, you may have to pay off the loan in full before your next federal tax return is due. If you are unable to pay off the loan, you may face tax penalties.


And don't forget that you will lose investment returns on the money you withdraw from your 401(k).





8. Family and friends



Getting a loan from a family member or friend may seem like an uncomplicated way to get cash when you need it. After all, a family loan may come without a contract - or a primary contract - and you may get a very favorable interest rate even without premium credit.


But things can get complicated if a dispute arises over the repayment of the loan. What if you still owed $5,000 to your Aunt Denise? It can cause a lot of embarrassment. Another drawback: Because your friend or relative can't report your loan payments to the three major credit bureaus, you won't reap any credit-building benefits.




Next steps



Whether you need quick cash or a long-term loan, you should take the time to research loan options and ask questions before you borrow money. Here are some key questions to think about.




  • Why do I need the money, and what kind of loan is best suited for it?
  • What is the interest rate?
  • Are there any fees associated with the loan?
  • How long should I repay the loan?
  • What happens if I can't repay the loan?
  • Will the creditor perform a difficult credit check that will affect my credit scores?



Try to stay away from expensive forms of borrowing such as property loans and payday loans if possible.


About the author: John Egan is a blogger, content marketer, and freelance writer in Austin, Texas. He is a former editor-in-chief of the Austin-based startup LawnStarter, and previously worked for the Austin Business Journal, Bankrate and… Read more.


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