Where Can I Borrow Money? Exploring Your Options

How Does Getting a Personal Loan from a Bank Work?

Personal loans are one of the best ways to borrow money because they come with fixed interest rates, fixed repayment schedules, and a monthly payment that will not change. Ultimately, installment loans from banks give you a lump sum of cash upfront you can repay with a predictable monthly payment you agree to ahead of time. Also note that banks offer other types of credit as well, including lines of credit that let you borrow money as you need it.

Banks will consider approving loans for anyone who applies, but you may have a better shot at loan approval if you have an account with the bank you want to get funding through. Either way, you can visit a bank in person or apply for a personal loan online to get a decision.

How To Choose a Bank

Look for banks that charge competitive interest rates on their loan products, as well as those that advertise low fees. Specifically, you'll want to watch out for application fees, origination fees and other fees that make the loan more costly over time.

How to Qualify for a Bank Loan

Head to your local bank to inquire about funding options and fill out a loan application. If you have a relationship with a bank already and you have an online account you can log into, you may also have luck applying for a loan online.

Tips for Responsible Use

Only borrow what you need, and make sure you choose a loan with a monthly payment and term you can live with. Make monthly payments early or time to avoid long-term damage to your credit score.

Interest Rates 

The best personal loans come with interest rates that range from 2.99% all the way up to 35.99%.

2. Personal Loan from a Credit Union

How Does Getting a Personal Loan from a Credit Union Work?

Credit unions are not-for-profit financial institutions that are actually owned by their members, so they tend to have loans and other financial services with better rates and terms than banks. This means you may be able to save money on interest and fees if you qualify for a loan from a local credit union. 

How To Choose a Credit Union

According to the National Credit Union Administration, credit unions typically require some sort of affiliation to become a member. For example, you may be able to qualify based on your employer, having a family member who has already joined, your membership in another type of group, or your geographic location.

You may have to pay a fee to join a credit union, which is usually between $5 and $25.

How to Qualify

Because credit unions are owned by their members and exist to promote the well being of their "field of membership", they often have easier standards when it comes to loan approvals. This is especially true if you already bank with the credit union and you have a history of accounts with them. 

Tips for Responsible Use

While you may need to borrow money ASAP, you should make sure you're not borrowing more cash than you actually need. Also make on-time payments on your loan in order to build your credit score, and steer clear of late payments in order to avoid damage to your credit that can take years to repair.

Interest Rates 

Credit union loan interest rates also range from around 2.99% all the way up to 35.99%, but you should check with your local credit union to see what they're offering.

3. Online Lenders

How Does Getting a Personal Loan from an Online Lender Work?

Online lenders offer the same loans and financial products as brick and mortar institutions, except they may be able to offer interest rates on the lower end of the scale since they don't have to maintain physical locations. Shopping for a loan online is also easy since you can compare the best emergency loans online anytime you want and fill out an application once you're ready to get funding.

How To Choose an Online Lender

Look for online lenders that advertise loans with the most competitive interest rates and lowest fees (or no fees). 

Also check for online loan companies that let you "check your rate" or get pre-approved before you apply. This step can help you gauge your approval odds before you move forward with a full loan application.

How to Qualify

While the benefits of having a good credit score include being able to qualify for an online loan with the best possible rates and terms, it's possible to get a personal loan for bad credit or fair credit as well. Just remember that you'll pay higher loan fees and more interest if you don't have an excellent credit score.

Tips for Responsible Use

Comparing online lenders is the best way to ensure you're finding loan companies with competitive rates and terms. Make sure you only borrow as much as you need at the moment, and only settle on a loan that comes with a monthly payment you can afford.

Interest Rates 

Interest rates for online loans can start as low as 2.99%, but many online lenders charge rates as high as 35.99% for borrowers with a low credit score. 

4. Peer-to-Peer Lenders

How Does Getting a Personal Loan from a Peer-to-Peer Lender Work?

Peer-to-peer lenders are online loan companies that get funding from individual investors instead of a bank. This means you're borrowing money from regular people instead of traditional financial institutions, which may not make much of a difference to you at all.

While LendingClub was once a peer-to-peer lender, this company ended its peer lending platform at the end of 2020. Remaining peer-to-peer lending institutions include Upstart and Prosper.

How To Choose a Peer-to-Peer Lender

Compare peer-to-peer lenders just like you would a traditional bank or online loan company. Ultimately, you'll want a loan with the lowest interest rate and fees you can find, as well as a lender who can get you the money you need within a few business days.

How to Qualify

Peer-to-peer loan requirements vary by lender. As an example, loans from Upstart require you to be at least 18-years-old, have a job and a verifiable income and personal address, and earn at least $12,000 per year. You also need to have a credit score of at least 300, and a maximum debt-to-income ratio of 45% to 50% depending on the state you live in.

Tips for Responsible Use

Only borrow what you need right now, and make sure you opt for a loan with a monthly payment that fits with your budget. Make all monthly payments on-time to help provide a boost to your credit score.

Interest Rates 

Prosper offers peer-to-peer loans with rates as low as 6.99%. Meanwhile, Upstart says its average 5-year loan comes with an APR of 26.48%.

5. Home Equity Loans

How Does Getting a Home Equity Loan Work?

A home equity loan is an installment loan that lets you borrow against equity you have in a property you own. Because home equity loans use your home as collateral, they typically come with lower interest rates and better terms than some other borrowing options like personal loans or credit cards.

A range of financial institutions offer home equity loans, including banks, credit unions, and online loan companies.

How To Choose a Home Equity Loan

Look for home equity loans that offer the lowest interest rates you can find, and check for fees like origination fees and application fees. The Federal Trade Commission (FTC) also points out that you should read through the fine print to look for hidden terms like balloon payments or prepayment penalties.

How to Qualify

According to the FTC, most lenders who offer home equity loans prefer you to borrow no more than 80% of your home's value through a first mortgage and a home equity loan combined. If you have a home worth $300,000 for example, the total of your first mortgage and home equity loan amount may not exceed $240,000.

Other requirements for home equity loans depend on the lender, but you typically need good or excellent credit and you'll need a regular income you can prove.

Tips for Responsible Use

Don't overborrow with a home equity loan if you can help it, and make sure to take the monthly payments seriously. Since your home is used as collateral for this type of loan, you can lose your property to foreclosure if you stop making payments.

Interest Rates 

Home equity loan rates can vary by lender but typically start at around 6% for consumers with good credit.

6. 401(k) Loans

How Does Getting a 401(k) Loan Work?

If you have retirement savings in a 401(k) or a similar retirement account through an employer it's possible to take out a loan against this asset. According to Fidelity Investments, the amount you can borrow will depend on what the plan administrator allows, but it may be possible to borrow up to 50% of your savings (up to a maximum of $50,000) over a 12-month period.

How To Choose a 401(k) Loan

If you want to borrow from your 401(k), you won't have any other options outside of contacting the company that manages your retirement plan. Ultimately, that's the only company that can help you with a 401(k) loan.

How to Qualify

One major benefit of 401(k) loans is the fact they are no credit check loans that don't make you qualify based on your credit score and income. You're borrowing your own money, so you just need to initiate the process for this loan to get the funding you need. 

That said, you should know that most 401(k) loans have to be paid back within five years. Also be aware that, if you leave your job, you may be required to repay the loan immediately.

Tips for Responsible Use

Since 401(k) loans actively reduce the amount of money you have saved for retirement, you should use this type of loan sparingly and only when you have no other choice. Make sure to repay the loan with on-time payments and according to the plan you agreed to ahead of time.

Also be aware that, if you don't pay the 401(k) loan back or if you let your account go into default, your loan becomes a permanent withdrawal that incurs taxes and a 10% penalty (if you're under the age of 59.5).

Interest Rates 

While 401(k) loans do require you to pay interest, these payments are paid back to you directly into your retirement account.

7. Credit Card Loans

How Does Getting a Credit Card Work?

Applying for a credit card can help you get funding when you need to borrow money immediately. After all, you can use the credit card to pay for emergency bills you didn't expect (i.e. surprise car repair bills or medical expenses), or to get a cash advance at an ATM.

Either way, you can apply for a credit card online if you don't have one already.

How To Choose a Credit Card

Because you want to use a credit card to access funding quickly, you should look for cards that offer lower interest rates or even introductory 0% APR offers for purchases, balance transfers or both. Also compare cards based on their cash advance fees if you plan to use your card to get cash out of an ATM.

How to Qualify

Credit cards with 0% introductory offers typically require good credit, and some of the absolute best offers on the market today are geared to consumers with credit scores of 800 or higher. Fortunately, there are credit cards for fair credit available if you still need to build credit to get to that point.

Tips for Responsible Use

Remember that credit cards tend to charge higher interest rates than personal loans, so you'll want to pay back amounts you borrow quickly. If you qualify for a credit card that has 0% APR for a limited time, you'll need to pay off your balance to avoid interest before the introductory period ends. 

If you use your credit card to get a cash advance at an ATM, you should know that you'll pay an upfront cash advance fee and you'll lose your grace period. This means interest will begin accruing on that balance right away. With these details in mind, you should only take out a cash advance if you need small loans and you know you can pay back the funds in a short amount of time.

Interest Rates 

According to the Board of Governors of the Federal Reserve System, the average credit card interest rate for accounts assessed interest worked out to 20.40% as of November 2022.

8. Margin Account

How Do Margin Accounts Work?

A margin account is a type of investment account that lets you borrow money you can use to purchase securities like stocks and bonds. Ultimately, this means margin accounts are best for borrowing money for investing vs. other purposes. 

How To Choose a Margin Account

You can get a margin account with any type of brokerage firm that offers this type of funding. This includes companies like Fidelity, Robinhood, and Vanguard.

How to Qualify

Margin accounts require you to have some invested assets already. For example, Fidelity says you need to have 50% of the total purchase amount in your account ahead of time, or $5,000 invested if you wanted to buy $10,000 in securities on margin. Fidelity also says margin accounts require a minimum of $2,000 net worth.

Tips for Responsible Use

Only invest on margin if you have considerable investing experience and you are willing to lose money. Remember that borrowing on margin to purchase securities leaves you open to considerable losses if the value of your investment plummets.

Interest Rates 

Margin account interest is typically lower than you'll pay with other types of loans. Vanguard says interest charged on margin accounts is calculated on a daily basis. 

9. Buy Now, Pay Later Options

How Does Buy Now, Pay Later Work?

Some merchants and retailers offer "buy now, pay later" promotions that let you make purchases now then pay them back at a later date. These options don't necessarily let you borrow small loan amounts or any money at all. Instead, they let you buy something you need with the promise you'll begin making payments in the future.

How To Choose a Buy Now, Pay Later Option

Since buy now, pay later funding options are available for purchases only, you'll pick one based on what it is you need to buy. As an example, buy now, pay later (BNPL) is often available for large purchases like furniture or electronics.

How to Qualify

While BNPL funding is available to consumers with a broader range of credit profiles, you will likely need fair credit or better to qualify.

Tips for Responsible Use

Check BNPL offers for their interest rates and fees, and only borrow money this way when you need to. Make sure your BNPL offer does not come with prepayment penalties or exorbitant interest charges, and pay your loan back early if you can. Most importantly, you need to make on-time payments to avoid damage to your credit score.

Interest Rates 

According to the FTC, many BNPL offers come with "high late fees, per-transaction fees, or change fees, among others." Interest rates for these offers vary widely.

10. Car Title Loans

How Does Getting a Car Title Loan Work?

Car title loans use a car you own as collateral, and they offer small loan amounts with the option to repay over anywhere from 30 days to three years. These loans are available from a range of title loan companies online, but you may also find local companies who offer these loans.

How To Choose a Title Loan

Because auto title loans tend to come with high interest rates and loan fees, you'll want to vet options carefully. Ideally, you'll choose a title loan with the lowest interest rate you can find, plus minimal loan fees.

How to Qualify

Since you're using a car you own as collateral, title loans are typically easy to qualify for. However, you have to have a clear auto title to use during the loan application process, and you will need to go through a credit check.

To apply for a car title loan, you'll need to show the lender the following:

• A loan application
• Your car
• Title to your car
• Photo ID

Tips for Responsible Use

Because title loans can be expensive, you should only use this borrowing option as a last resort. If you have to borrow with a car title loan, you should strive to pay the loan off as quickly as you can.

Also remember that the lender can take your car if you default on the loan.

Interest Rates 

The FTC says title loan companies charge a monthly fee that can be as high as 25% of your loan amount or an annual percentage rate (APR) as high as 300%.

Final Word

All kinds of money lenders want to give you the cash you need, but that doesn't mean they're all the same. That's why you'll want to compare all the best places to borrow money based on the interest rates and fees they charge, as well as the type of loans they're offering.

With some research and planning, you can borrow money online, at a local bank or credit union, or through a loan agency without breaking the bank or ruining your credit score.

• Consumer Financial Protection Bureau, "What is a personal installment loan?" Accessed March 25, 2023.
• National Credit Union Administration, "What Is a Credit Union?" Accessed March 25, 2023.
• National Credit Union Administration, "Find, Join or Start a Credit Union." Accessed March 25, 2023.
• Fidelity, "Thinking of taking money out of a 401(k)?" Accessed March 26, 2023.
• Board of Governors of the Federal Reserve System, "Consumer Credit - G.19." Accessed March 26, 2023.
• Federal Trade Commission, "Home Equity Loans and Home Equity Lines of Credit." Accessed March 26, 2023.
• Vanguard, "Investing On Margin." Accessed March 26, 2023.
• Fidelity, "Meeting the requirements for margin trading." Accessed March 26, 2023.
• Federal Trade Commission, "Car Title Loans." Accessed March 26, 2023.