Key Takeaways
- The cheapest ways to borrow money include 0% APR credit card offers (if you qualify), borrowing from friends or family, and low-interest personal loans from banks or credit unions.
- Personal loans from banks and credit unions offer predictable repayment terms, relatively low fixed interest rates, and the ability to build credit, though approval may require a good credit score.
- 0% APR credit card promotions can be useful for short-term borrowing or debt consolidation, but they carry risks such as high post-promo interest rates and potential balance transfer fees.
- Borrowing from friends or family can be cost-effective and flexible, but it requires clear communication and planning to avoid damaging personal relationships.
The cheapest ways to borrow money are usually low-interest options like borrowing from friends or family, using a 0% APR credit card (if you qualify), or taking out a personal loan with a competitive rate.
If you’re trying to avoid high interest and hidden fees, the good news is, there are affordable options out there. Whether you’re dealing with an emergency or trying to consolidate debt, this guide will walk you through the smartest, most budget-friendly ways to borrow without digging yourself into a deeper financial hole.
Personal Loans From a Bank or Credit Union
Borrowers could get a personal loan for cheap at a bank or credit union. Personal loans from a bank or credit union are typically the first choice for people in need of emergency cash due to their convenience and affordability. The loan terms and credit requirements can also be very flexible.
Most financial institutions offer fixed-rate loans, which provide predictability for monthly payments. Loan terms can range from a few months to several years, and personal loan amounts typically range between $1,000 and $50,000.¹ However, the terms you qualify for depend on your credit score, income, and other factors. These lenders also tend to report to the major credit bureaus, so consistent on-time payments can positively improve your credit history.
Banks
Applying for a loan through a bank is one way to borrow money. Borrowers can choose to apply in person at a local branch or online through the bank’s website. You will have to provide basic personal information, such as a valid form of identification and proof of income.
Bank loans typically have fixed interest rates, longer loan terms, and large loan amounts. However, the credit requirements can be strict. Eligible credit scores can range from 300 to 850 points, and a “good score” is generally considered higher than 670. If you don’t have a good credit score (at least 670 points), you may not qualify for a traditional personal loan through a bank.
Credit Unions
Credit unions are not-for-profit cooperative lenders that provide personal loans and other services to its members. Since these financial institutions are owned and controlled by its members, they typically offer more favorable interest rates and lower fees than traditional banks.
There are three types of federal credit union charters, single common bond, multiple common bond, and community. Each charter may have a common bond requirement that prospective members need to meet, such as:
- Occupational — Members work for the same employer or in the same industry.
- Associational — Members belong to a specific church, labor union, or group.
- Community — Members live, work, worship, or attend school in the same area.
If you are not a member of a credit union, you may not be able to apply for a loan. But joining a credit union is possible, as there are approximately 4,572 federally insured credit unions in the US.²
Credit Card Offers
There are credit card deals to consider if you are looking for cheap ways to borrow money. Some credit card companies offer introductory 0% APRs, which allows new applicants to borrow with no interest fees! The introductory rate typically lasts a few months, which gives you time to create a repayment plan.
But while 0% APR credit card offers can be great ways to borrow money, there are a few disadvantages to consider. Here’s a quick breakdown of the pros and cons of using credit cards to borrow money:
| Pros | Cons |
| Interest-Free Borrowing Period – Borrowers can carry a balance and not pay interest during the introductory 0% APR period. | Temporary BenefitThe 0% APR period is usually limited (e.g., 6–21 months), after which a much higher interest rate applies. |
| Helpful for Large PurchasesThe credit limit can be high, which is Ideal for financing large purchases. | High Post-Promo APROnce the promo period ends, any remaining balance may be subject to high interest (often 15%–29%) or treated as a credit card cash advance if used for cash withdrawals, which may incur additional fees. |
| Debt ConsolidationCan be used to consolidate and pay off high-interest debts faster by transferring balances. | Balance Transfer FeesMany cards charge 3%–5% on the amount transferred, which can reduce savings. |
| Improves CreditConsistent on-time payments and low utilization can boost credit scores. | Credit Score RiskMissing payments or running up high balances can hurt your credit. |
| Additional Card BenefitsMany 0% APR cards include perks like rewards, cash back, or fraud protection. | Qualification RequirementsApplicants often need good to excellent credit to be approved. |
| No InterestSome cards offer 0% APR on purchases, helpful for managing short-term expenses. | Limited ScopeNot all 0% offers apply to both purchases and balance transfers—read the fine print. |
| Pay Off Debts SoonerAll payments go toward principal, not interest, during the promo period. | Temptation to OverspendThe lack of immediate interest charges may encourage unnecessary purchases. |
Borrow From Friends And Family
Borrowing from friends or family can be one of the cheapest ways to borrow, potentially even interest free. By going to a friend or family lender, you could secure an interest free loan. Most family members and friends would accept a personal IOU, which gives you repayment flexibility. However, this form of trust based borrowing can be risky and potentially damaging to your personal relationship. If you cannot secure a personal loan agreement, then it’s essential to establish a personal finance plan with your friend or family member.
Tips for Borrowing from Friends and Family
If you intend to borrow money from a friend or family member, keep these tips in mind to avoid any potential conflict:
- Determine Your Needs — Consider how much money you need before approaching a friend or family member for a loan. Be honest about your financial situation and consider disclosing why you aren’t applying with online lenders.
- Set a Repayment Date — Decide on a few repayment date suggestions before you borrow money. Analyze your finances and determine if it would be easier to make monthly payments or one lump sum payment.
- Be Prepared for “No” — You may be denied a loan from a friend or family member. They may feel uncomfortable lending money or going outside their financial budget. Be prepared for a potential loan denial and have a back up plan.
- Discuss Payment Failure — Life can be unexpected and you may not be able to repay the loan by the initial agreed upon schedule or date. If this happens, it’s important to communicate with your lender.
- Keep Communication Open — It’s critical to communicate with your lender and keep them informed of any issues. If you experience any repayment difficulties, talk to them about a potential solution, such as a short extension.
Payday Alternative Loans (PALs)
A payday alternative loan (PAL) is similar to a payday loan, but is generally considered a safer financial option. Unlike high interest installment loans, PALs are structured to be more affordable and less predatory.
In contrast, payday loans are small-dollar loans that generally provide up to $500. Borrowers are typically expected to repay the loan in one lump sum by their next payday. While convenient, payday advance loans are debt traps that can worsen financial situations.
If you need a small emergency loan, consider using a payday loan alternative. Many financial institutions offer PALs, such as credit unions. A credit union PAL is regulated by the National Credit Union Administration (NCUA), so you can rest assured that you will not be trapped into a predatory loan agreement. Credit union PALs can provide various benefits, such as competitive rates and flexible repayment plans. The loan amounts for PALs can be higher than payday advance loans, although the credit union loan cap varies per lender.
Home Equity Line of Credit (HELOCs)
Home equity lines of credit are secured loans that use real estate as collateral. If you’re a homeowner, you could borrow money with home equity. A home equity loan or line of credit is like a second mortgage, because it becomes a second loan secured by the same property.
HELOCs are the cheapest secured loans on the market compared to other borrowing options. Eligible borrowers could get several thousand dollars for unexpected emergencies, but there are some downsides. You are likely to get a variable interest rate on a home equity loan or HELOC, which fluctuates due to economic conditions. Rates can increase and decrease throughout the repayment period, which can result in unpredictable monthly payments. If you need financial stability, you may be better off with a different loan option with fixed interest rates.
HELOCs are secured loans, which makes them financially risky for the borrower. If you experience a personal finance issue and default on your loan, the lender can foreclose your property. It’s critical that you consider unsecured loans first, and only use secured loans as a last resort if you have had financial issues in the past.
The Bottom Line: What Are the Cheapest Ways to Borrow Money?
Some of the cheapest ways to borrow money include personal loans, credit card offers, PALs, and borrowing from friends or family. These methods can offer a good balance of affordability and flexibility. Avoid high interest installment loans and other predatory products from online lenders that could harm your credit report or financial future.
Choosing the right borrowing method depends on your needs and repayment ability. Keep in mind that interest paid on certain loans may affect your budget long term, so weigh each option carefully.
References:
- What Is the Max Amount for Personal Loans? │ Investopedia
- Quarterly Credit Union Data Summary │ NCUA
