The Best Ways to Borrow Money

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The Best Ways to Get a Loan Money
Do you need to borrow money? We look at the most affordable and fastest ways to obtain, plus two options to stay clear of.


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Updated on Nov. 28 2022.

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It's usually better to pay cash instead of credit money, however, sometimes life throws a curveball, and you need to find alternative options.
If this occurs it is important to know that not all forms of borrowing are created equally and have different negative financial consequences than others. If you are looking to secure the highest rate you can or you just require cash fast, be sure to consider all options and assess the risks.
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The cheapest ways to borrow money

Borrowing always comes with a cost, but some types of loans are less expensive than others particularly those with good or excellent credit (a score of 690 or more).
Here are your best options:
1. Personal loan from a bank or credit union
Credit unions or banks generally offer the lowest , or the total cost of borrowing for personal loans. Loan amounts can range from just a few hundred dollars up to $50,000 or greater.
Certain banks might offer an additional APR discount to existing customers. Perks like flexible payment options might be available from a bank to help you to manage loan repayment.
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Many banks allow you to preview the loan's rate and terms prior to when the formal application is made. If you don't have great credit, however, it can be difficult to be approved by the bank.
might offer better rates than banks, especially for those with poor credit (a score that is less than 630).).
Loan officers may consider your financial situation in general instead of relying upon your creditworthiness. However, you must be a member of a credit union before applying.
2. Credit card at 0% APR
A 0% APR credit card could be among the cheapest ways to borrow money if you can pay off the balance within the initial period of the card. It is generally necessary to have good or good credit to be eligible for.
Certain cards provide an introductory period between 15 and 21 month, where no interest will be charged for purchases.
If you get a credit card with a 15 month introductory period to cover an unexpected expense, such as a medical bill or car repair, and then pay the balance off nine months later. You'll have borrowed the money at no cost.
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3. Buy nowand pay later
" " plans let you buy items today and pay for them in the course of a number of installments, typically without interest or fees. A lot of stores offer these payment plans when you checkout online process, and occasionally in-store.
is a buy-now, pay later business that does not charge interest, but may charge a fee for late payments. The company charges interest according to the repayment term.
If you are able to get a zero-interest payment option, buy now, pay later may be a cost-effective method to finance your essential expenses. But because it's easy to obtain, it could also lead to overspending.
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4. 401(k) loan
Retirement loans permit you to borrow money from yourself. As opposed to withdrawals of your 401(k), you don't need to pay tax or penalties for a loan.
They also provide some of the most affordable rates even if your credit score isn't great. The rate of interest on a typical loan is equal to the prime rate -- which is the benchmark that is used by banks to determine rates on consumer loan product -- plus one or two percentage points. The interest earned is returned towards your retirement savings.
Another key perk is the possibility of not paying a bill, your credit score won't take a hit since the defaulted 401(k) loans are not reported to credit bureaus.
The disadvantage of a 401(k) loan? You're borrowing from your future self, which reduces the retirement nest egg as well as the growth of your tax-deferred account.
5. Line of Credit for Personal Use
are a hybrid between are a mix of a loan and a credit card and are offered by some financial institutions and credit unions. As with the loan the lender must accept your application based on your credit profile or income, as well as other debts. However, unlike credit cards after approval you only use the funds you need and pay interest only for the amount that you use.
This is ideal for those who aren't certain what amount they should borrow. Excellent or good credit customers have the greatest chances of getting the best rates.
Check out the cheapest methods to get money
Type



Pros



Cons



Personal loan from the credit union or bank


Lower APR than the other types of personal loan lenders.
Discounts for customers who are current members.
Perks like financial advising and flexible payments.
There are many types of loans available, such as Secured personal loans.



You need credit that is excellent or great.
Must become a member to apply for a credit union loan.
Prequalification may not be available.



Credit card with 0% APR


You will pay 0% cost of all purchases during the initial period.



You need credit that is excellent or great.
The balance must be paid back within an extremely short period of time.



Pay now, buy later


No interest or fees with some plans.



Certain plans may charge interest or charges.
It can result in overspending.



401(k) loan


You can borrow money from yourself instead of a third party.
Low interest rates.
The interest you earn is returned to your retirement account.
Missed payment does not hurt your credit score.



Reduces retirement nest egg as well as its ability to grow.



Line of Credit for Personal Use


Make money according to the amount you require and pay interest only on what you spend.
It is ideal for people who aren't sure of their total borrowing need.



Credit score must be excellent or good.









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Fastest ways to get money

Typically, the easier you can get the money the more risky or expensive it can be. But there are some great alternatives:
1. An individual loan through an online loan provider
In comparison to traditional lenders such as credit unions or banks, online lenders boast convenience and speed given their fully online application and funding process. Some banks, on the other hand they require that new customers go to a branch in order to complete the process.
You'll want to pre-qualify and compare lenders to find the most favorable APR. This can largely depend on factors like the credit score and income. The online lenders perform a gentle credit test during pre-qualification therefore you are able to compare without affecting your credit score.
The online lenders cater to an array of customers. People with bad or fair credit scores are more likely have an online lender rather than a bank.
See if you pre-qualify for an individual loan without impacting your credit score
Just answer a few questions to receive personalized rate estimates from multiple lenders.


The loan amount
on NerdWallet








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2. Apps for loans
If your need isn't substantial you can make small advances on your salary, and sometimes instantly -- though you may pay an extra fee for expedited service. More typical funding times are between one and three days.
Most cash advance applications require a monthly subscription fee or an optional tips. The app, which offers advances of $100-$750, does not charge interest, but it asks for a gratuity of up to $14 for each advance.
3. Cash advance using a credit card
There is also access to . Think of it as using your credit card in order to "buy" cash, not goods or services.
Cash advances are typically capped at a few hundred dollars, however, they're simple and fast to acquire. When your card has PIN, just go to an ATM to cash out. If you do not have a PIN carry your ID card and your credit card to a bank that provides advances through your card's payment network, like Mastercard or Visa.
While it's a quick method of getting money into your hands, it's costly. You will likely encounter a combination of cash advance fees as well as ATM or bank fees as well as interest rates that are higher than the rate charged for purchases. The costs start to accrue in a matter of minutes.
The year's top personal loans
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4. Loan from family or friends
You may have someone in your circle who can lend you money if you're in need. You'll be able to avoid the lengthy procedure of applying for a loan and the approval procedure required from other types of lenders. This can be a good option for anyone who may need urgent cash or who is concerned that they're not eligible for an loan using their current credit score.
However, approach a cautiously. The lending of money between family and friends can cause conflict. Therefore, it is recommended to put the mutually agreed terms on paper and have the document notarized.
5. Pawnshop loan
As with an secured loan from a bank, it is a requirement to pledge something as collateral. Think jewelry, antiques or even electronics. After you take the item to the pawnshop, it evaluates the value, condition and resale value and then makes an offer.
If you agree to the price that you are offered, you will walk away with the cash as well as a pawn ticket. Upon repayment, you can re-collect your item. If you don't pay on time which is 30-days on average- the pawnshop keeps it.
A Pawnshop loan does not require an loan approval procedure, and it can be a quick way to borrow money without requiring a credit score. However, in conjunction with the interest rates charged on the loan the pawnshops also charge storage fees appraisal, insurance and storage that could result in an APR as high as 200 percent.
Check out quick and easy ways to borrow money
Type



Pros



Cons



An individual loan via an online lending institution


Fully online application procedure.
There are options for Fair and Bad credit.



Higher APR depending the credit scores of your clients.



Apps for loan


Charge optional fees.
Option to receive cash instantly.



There may be a charge for instant acces to money.



Cash advance using the credit card


The application and approval process is not required is required if you already own the card.
As easy as visiting an ATM or a bank.
Instant access to funds.



The high cost of interest and fees begin to accrue as soon as they are incurred.



Loan from family or friends


There is no application or approval process.



Conflicts can result.



Pawnshop loan


There is no process for application or approval.
Immediate access to funds.



Potential to lose a valuable item.









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Borrowing options to avoid

1. Payday loans
A is a small temporary loan that is designed to be repaid through your next paycheck. While funds can be obtained in a matter of minutes, payday lending is extraordinarily expensive and should only be a last resort. It is possible to pay $15 for every $100 borrowed, which is equivalent in a rate that is 391% APR for a two-week loan.
The Federal Consumer Financial Protection Bureau shows that the majority of borrowers wind having to pay more fees than they did initially as credit, which creates the cycle of credit.
2. High-interest installment loans
They are paid back over a period of weeks to months and have interest rates that exceed 36%, which is the maximum rate that consumers consider affordable.
For instance, a $1,000 loan with a 6-month period and a 60percent APR would cost $182 in interest, and would require the payment to be $197 per month. The same loan with a 20% APR will cost you the same amount in interest, which is $59. It's recommended to avoid high-interest installment loans if possible, as high APRs can create a problem in repaying off these loans off.
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Paying back borrowed money

Once you've decided what you'll do with the money, immediately make an . You don't want to risk a financial setback to turn into a an ever-growing and long-term debt.
Not sure where to start? NerdWallet recommends using the to prepare a budget as it's a simple-to-follow plan that takes into account your daily living expenses as well as debt obligations and savings.
You can reduce the chance of having to take out a loan by being aware of your spending and building a healthy emergency fund for the future.


Authors: Jackie Veling covers personal loans for NerdWallet.


Ronita Choudhuri is the person who handles personal loans in NerdWallet.







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