When life happens, things can get expensive. Without an emergency fund, you may need to look for external resources for borrowing money. There are a variety of ways to borrow money, but it’s important to choose the right method for you and your unique circumstances. Here are five ways to borrow money.
In the era of fintech, there is a broad array of online lenders offering competitive rates for personal loans. These options can be faster than traditional lenders and may allow you to obtain same-day funding in some cases. Be sure to shop around and compare APRs, which will correlate closely with your credit score. For more information on how to apply for a personal loan, check out our article titled “How to Apply for a Personal Loan in 5 Easy Steps”.
Signing up for a 0% APR credit card can be an inexpensive way to borrow money if you’re able to pay back your balance within the introductory period, which may last anywhere from six to 18 months. Look for 0% APR credit cards that offer an introductory period that is favorable to your needs. Using a 0% APR credit card to cover unanticipated financial needs means you can borrow money with zero cost, so long as you can pay off the balance completely within the introductory period.
A personal line of credit may be a good option if you’re unsure of your exact borrowing needs. This option is a hybrid between a credit card and a loan in that a lender will need to approve your application. Once approved, you can draw funds based on what you need. If you are approved for a $3,000 loan but you only need half that, you can draw $1,500 and you’ll only pay interest on the amount you draw.
For those who have less-than-ideal credit or who find themselves needing funds fast, a loan from friends and/or family may be best. The benefit of turning to relatives and friends to borrow money is that you can circumvent a lengthy application and approval process and avoid the bad news if you don’t qualify for a traditional loan.
On the other hand, it’s important to proceed carefully when borrowing money from friends or family. To avoid a potential conflict later on, document and notarize your mutually agreed-upon terms.
Payday loans are short-term loans of a small amount that are meant to be repaid on your next “payday.” The only eligibility factors for a payday loan are having a bank account and some type of income. If you qualify, you can receive funds in as little as 15 minutes in a payday loan store.
This is one of the most expensive ways to borrow money and is only advisable to use in the direst of circumstances. Oftentimes, a cycle of debt is created where borrowers end up paying more in fees and interest than they originally received for the loan.
Alternatively, newer loan options allow people to tap into their next paycheck early. Apps like DailyPay and Earnin enable people to get early access to their paycheck without incurring fees. These options may be less expensive than traditional payday loans.
It’s not unusual to get caught off guard and find yourself needing to borrow money. Understanding your options and creating a plan to pay back what you borrow can help you make the best and safest choice to handle a temporary financial setback.