8 Best Ways to Borrow Money

fizkes / iStock/Getty Images
fizkes / iStock/Getty Images

Once upon a time, the average expense for an emergency was about $400. Nowadays, the average consumer emergency expense is over four times that amount at $1,700. If you don’t have the cash in your savings account to cover a lockout, vehicle tow, dental visit or another unexpected bill, you need options to borrow money ASAP. Keep reading to get answers to the question, “Where can I borrow money?”.

8 Ways To Borrow Money ASAP

Your options for borrowing money depend on several factors, including the amount of money you need, your credit history and your assets. Although some sources are easier to tap than others, take the time to understand the potentially high fees and interest you’ll pay, as well as other risks before taking a loan or a cash advance.

1. Credit Card Advance

Lending and consumer finance expert Kyle Enright, president of Achieve Lending said that a credit card advance is generally not recommended, as interest rates for cash advances are so high. “However, for some people and some situations, it may provide an option if they have a careful program designed to pay off the debt quickly — ideally at the end of the month,” he said.

Getting a credit card cash advance is something you can do from an ATM, but you’ll pay for the convenience. In addition to the higher interest rate, you’ll also pay a cash advance fee.

Pros

  • Convenience

  • No credit check

  • No loan approval

Cons

  • High fees

  • High interest rates

  • Higher balances and credit utilization

2. Personal Loan

Personal loan interest rates will be lower than those attached to credit cards, with the best rates going to those with the best credit scores. “The loan will come with a set payment schedule, a limited term of payment and no risk of adding to the balance with additional charges,” said Enright. “Depending on the lender, funding can take place in just a few days.”

Independent lenders often use less strict criteria than banks or credit unions. If you have a lower credit score, you might want to apply through an independent lender or find someone who will accept collateral like a certificate of deposit, jewelry or other asset.

Pros

  • Higher loan amount than credit card advance or title loan

  • Flexible terms and loan amounts

  • Quick approval

Cons

  • High interest rates

  • High payments

  • Fees

3. Friend or Relative

A loan from a friend or family member comes with a good interest rate and no credit check. But you will want to prioritize payments to avoid putting strain on the relationship. It is smart to put this agreement in writing so both parties are clear on expectations.

Pros

  • Lower costs and interest rates

  • Flexibility

  • No credit check or application process

Cons

  • Can lead to disputes

  • Does not boost your credit score

  • Potential tax implications for borrower and lender

4. Home Equity

How fast you can get a home equity loan will vary on the lender so before going this route, call and find out the details. “Though it can be risky and requires enough equity in one’s home, homeowners who qualify may be able to obtain funds through a home equity loan or home equity line of credit,” Enright said. One thing to keep in mind is that home equity loans often have fixed interest rates while home equity line of credit rates are often variable.

Pros

  • Predictable payments

  • Fees and interest rate tend to be lower than other loan options

  • Can get a large lump sum if the home has enough equity

Cons

  • Foreclosure is possible

  • High credit requirements

  • Closing costs

5. Vehicle Title Loan

If you need to borrow money ASAP, a vehicle title loan might be an option. “It may be possible to take a loan on a vehicle with a clear title,” said Enright. “Rates can be extremely high and terms can be strict. You risk losing the vehicle if you miss a payment.”

According to Lending Tree, the average title loan comes with a finance fee of about 25%. This comes out to around $250 in finance charges for a $1,000 loan, plus additional fees allowed by your state. If you opt for this type of loan, it is typically short-term — usually less than a month — but some states might allow longer terms. You can expect to get a loan that is equal to 25% to 50% of your vehicle’s value.

Pros

  • Rates tend to be lower than unsecured loans

  • Quick approval process

  • Available to individuals with lower credit scores

Cons

  • Vehicle is collateral

  • Must own the vehicle and have equity available

  • High interest rates

6. Retirement Account

Typically retirement account funds are saved for you to use later in life. But if you are in a pinch and need to borrow money, you can tap into the funds.

Different employers have different rules for 401(k) withdrawals and loans, so check the disclosures you received when you opened the account. You might qualify for a hardship withdrawal from your 401(k) if you need the money for things like medical or funeral expenses, tuition costs or to prevent foreclosure or eviction. However, you can also take a loan from your 401(k).

Pros

  • No credit check or damage to credit score

  • Interest goes back to your account

  • No prepayment penalties

Cons

  • Must pay back loan in full within 60 days after leaving job

  • Tax penalties for not following rules

  • Lost compound interest

7. Life Insurance Policy

Your life insurance policy might let you borrow funds if you need them. “While there’s no requirement to pay it back, the amount will be deducted from whatever goes to beneficiaries,” said Enright. You have to have a whole or universal life insurance policy to borrow from it. Term life insurance policies do not have a cash value component.

Pros

  • Quick approval

  • No effect on credit score

  • Flexible repayment terms

Cons

  • Policy must have a cash value

  • Possible tax implications

  • Effects on coverage

8. Buy Now Pay Later

If you need money fast to purchase an item, consider using a buy now pay later platforms (BNPL), such as Affirm or Afterpay. These programs are similar to credit cards, giving you the money at the point of sale and allowing you to pay it back in installments. To use a BNPL platform, choose the service available when you check out. The platform runs a soft credit check before issuing the approval. Then you complete the purchase and start paying back what you borrowed according to the installment schedule.

Pros

  • Consumer protections for refunds and returns

  • Limited effect on credit score

  • Predictable payments

Cons

  • Each purchase subject to a credit check

  • Must have a savings or checking account, debit card or credit card to make payments

  • Late fees for late and missed payments

Final Take: Borrowing Money Tips

Sometimes, it’s necessary to borrow money instantly, but it’s important to consider any interest, fees and other risks involved. As you look for the best, cheapest option with the least risk to your personal property, keep the following in mind:

  • Make sure you can afford the monthly payments so you don’t miss a payment.

  • Review your credit score regularly and pay your bills on time.

  • Pay attention to loan terms, including the interest rate and fees, and choose the loan with the best terms.

  • Put everything in writing, from the loan amount to the installment payment amounts and dates, when borrowing from family.

  • Choose reputable lenders with a proven history.

When possible, pay more than the minimum payment so you can pay back the loan early.

Cynthia Measom contributed to the reporting for this article.

This article originally appeared on GOBankingRates.com: 8 Best Ways to Borrow Money

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