Finding a quick solution might seem daunting when strapped for cash. But thankfully, there are several loan options available for almost every financial situation. Whether you’re looking for a way to borrow money for a medical bill, correct a bank overdraft, or take care of some unexpected expenses, there are choices available. Understanding personal loans, cash advances, or credit cards may help you get the cash you need.
Depending on your current financial circumstances, you may be able to find a loan or cash advance for a few hundred dollars or more with a quick approval process. If you’re looking for more information on loans and what your options are, you’ve come to the right place. Learn everything you need to know about getting some extra cash in your bank account right here!
What Are The Different Ways to Borrow Money?
There are a few different ways to borrow money. Unsecured or secured personal loans are the two most popular funding options available to people. Unsecured loans are funded based on the applicant’s credit score and financial history. In contrast, secured loans are given when the borrower offers a certain asset as collateral.
But when it comes to most loans, not all forms of funding are created equal. Online lenders and other lending institutions may have several borrowing options available depending on your credit and financial credentials.
Here are some of the most common ways people can borrow money:
|Credit Score Importance
|A versatile form of funding for a variety of needs.
|Short-term or Long-term
|Can be versatile!
|Credit Card Cash Advance
|Allows cardholders to withdraw money against their credit limit.
|N/A (need to make the minimum credit card payment)
|Talk to the credit card company to understand terms.
|Home Loans (Home Equity Loans/Second Mortgage)
|Secured loans based on the home’s value.
|Moderate to Lengthy
|Ideal for homeowners with a good credit score.
|Not-for-profit organizations offering various financial services.
|Membership and specific requirements may apply.
|Extremely short-term loans to be paid back by the next payday.
|Very short-term (Typically 2-4 weeks)
|Risk of a debt cycle due to high-interest rates.
|Car Title Loans
|Loans using a vehicle’s title as collateral.
|Short-term to medium-term
|Risk of losing the vehicle if unable to repay.
Continue reading for more details:
Personal loans are among the most common methods people use for borrowing money. A versatile form of funding, personal loans can be either short-term or long-term loans, can come with competitive interest rates, and usually have an efficient approval process.
Lenders for personal loans are also quite accommodating. For example, you can sometimes even work with your personal loan lender to develop a payment plan with terms and rates that fit your unique financial needs. That way, making payments on your personal loan doesn’t have to be stressful or time-consuming. Along with that, you don’t always need a good credit score, depending on the lender you choose to work with. If you are looking for a quick and easy way to get the money you need quickly, you may want to consider a personal loan. At CreditNinja, we offer personal loans, too!
Credit Card Cash Advance
Cash advances from a credit card are another option for borrowing money. If you need to know how cash advance loans work, there are resources available.
When it comes to credit cards, most card issuers allow existing customers to take out cash. The card owner can withdraw money quickly using their available credit limit with cash advances.
While some credit cards come with perks like no-interest payments until your introductory period ends, they also lead to some borrowers racking up a lot of debt quickly after that introductory period ends. Before you take out a credit card cash advance, talk to your credit card company to make sure you understand your terms and rates. There is a chance you may be able to access cash quickly somewhere else for a better deal.
Home equity loans or taking out a second mortgage could be another way to borrow money if you own a home. A secured loan, like a home equity loan, is based on the value of someone’s home. The more a home is worth, the better chances someone has of getting a higher loan amount. However, if you want to get a cheaper rate, you would need to have a high credit score. So, if your credit is less than perfect or if you don’t own a home, a home loan may not be the right choice for you.
A credit union is another choice when considering the different ways to borrow money. Credit unions can offer unique financial services, depending on which one you go with. Credit unions are not-for-profit organizations. Because of this, credit unions tend to cater to the special needs of their borrowers. But, getting approved by a credit union can be difficult if you don’t meet their specific requirements. So, if you are looking for fast and convenient cash, you may want to look elsewhere.
Being an extremely short-term loan, a payday loan is meant to be paid back in full at the time of the borrower’s next payday, which means that the principal and interest on payday loans need to be repaid quickly. Suppose someone fails to pay back a payday loan within this short amount of time. In that case, they’re usually hit with extremely high interest rates that could lead to a cycle of debt. Military members and their families have special protections against payday loans, such as interest caps of 36%.1
While payday lenders are easy to find, they almost always come with inconvenient terms and rates. So, if you don’t think you’ll be able to pay back your entire loan within a week or less, you should steer clear of a payday lender.
Car Title Loans
Another way to borrow money is through a car title loan or an auto pawn. A car title loan uses a vehicle’s title as collateral, while an auto pawn uses the car itself as collateral. Unlike with a bank or credit union, you don’t need good credit in order to receive approval for a car title loan or auto pawn. But, if you don’t want the risk of potentially losing your vehicle or don’t want to deal with a very high interest rate, you may not want to get a car title loan or auto pawn. From 2013 to 2017, nearly 10% of title loan borrowers had their cars repossessed.2
Five Tips Everyone Should Know When Borrowing Money
Now that you know more about the ways to borrow money, it’s time to get started. But first, think about why you are looking into borrowing money. Do you just want to get some cash quickly, or is there a specific use, like funding your small business, that you have in mind? Do you want a loan with a fixed rate or variable rate? Once you understand where your money needs are coming from and what you want, you can decide on the best ways to borrow money for your needs!
Here are five expert tips to consider when you need to borrow money.
Consider Your Loan Alternatives
First, ask yourself if a loan really is the right answer for you. Do you have enough money in your bank account to cover your financial needs? If so, you may not want to take out a loan at all. Loans always come with interest rates, which means you’ll always be paying more than what you take out on a loan. So, to save as much money as possible, only apply for a loan when you really need the money.
Check Your Credit Score Before You Apply
To get a better idea of what your potential loan options might look like, it’s important to understand your credit score. If you have good or excellent credit, chances are you’ll get approved for a loan with a favorable interest rate. But if you don’t have good credit, know that there is still a chance you’ll get approved! Lenders typically look at credit history up to five years in the past, so your financial history during that time will play a role in the kinds of loans you’re eligible for.
Research Different Lenders
When looking for ways to borrow money, it’s always a good idea to research the different online lenders available. There are free educational materials online to help borrowers learn more about lenders before applying for a loan. Also, most lenders have websites where you can compare interest charges, maximum loan amounts, and more. Borrowing money is an important financial decision, so make sure you have all the facts upfront!
Read Your Contract Before You Sign!
Make sure to familiarize yourself with the loan fees you may encounter. Always read your loan contract thoroughly before signing for your own financial protection. Ask your lender to answer questions or provide any clarifications you need. To avoid unexpected expenses or unwanted surprises, always confirm you understand your loan contract before signing and agreeing.
Have a Loan Balance Payback Plan
To avoid falling into a cycle of debt you can’t get out of, have a financial plan for paying back your loan. Look at your monthly budget and decide how much you can set aside for your loan payments. If you want to pay back your loans and debts even faster, you should try to pay more than the minimum amount due. By paying a bit more each month, you could significantly decrease the amount of interest charges you’ll have to pay back.
A personal loan often has lower interest rates and longer loan repayment terms than payday loans, which usually have high interest rates and require repayment by the next payday.
Credit scores significantly impact your loan options. A good or excellent credit score may grant you access to favorable interest rates from traditional lenders or credit unions. Online lenders might offer more flexible approval criteria, catering to individuals with a wider range of credit scores.
Both credit cards and personal lines of credit offer revolving credit, but credit cards usually have higher interest rates and may come with additional perks like rewards. A personal line of credit may offer lower interest rates and is often considered more of a straightforward borrowing option.
Your credit report, reflecting your financial history and creditworthiness, heavily influences the interest rate on bank loans and home equity loans. A positive credit may secure you a lower interest rate, making the borrowing cost lower.
Becoming a credit union member can be beneficial as credit unions often offer lower interest rates and more personalized service. However, online lenders usually have a quicker approval process and may offer more varied loan options, especially to those with less than excellent credit.
Origination fees are upfront charges by lenders to process a new loan. They can increase the overall cost of your existing loan or a new loan you’re considering. It’s essential to factor in origination fees when comparing loan options to understand the true cost of borrowing.
Borrowing from a retirement account might be more favorable in terms of lower interest rates and the absence of a credit check. And when you do pay interest, you pay interest to yourself.
However, it comes with the risk of jeopardizing your future financial security. Unsecured loans or a credit card advance could be alternative options but often come with higher interest rates and may affect your credit score depending on your loan repayment behavior.
Key Takeaways On Borrowing Money With CreditNinja
In navigating the myriad ways to borrow money, it’s crucial to choose a path that aligns with your financial circumstances and long-term fiscal health. There are several options out there, such as a home equity loan, credit card, personal loan, title loan, and more. How you can borrow money depends on your income, credit score, and credit history.
Explore CreditNinja’s website for educational materials aimed at equipping you with the knowledge to make informed financial decisions.