Perhaps every adult at least once needed to borrow money. Someone needs a couple of hundred dollars without unnecessary paperwork and as soon as possible, while others are planning to get a large loan to buy a car or real estate for a long time. Regardless of what the money is for, each of us has a question: what is the best way to borrow money?
The choice of the most suitable way to borrow is up to you, and we will try to systematize the information for you and tell you, if not at all, about the most popular and easiest ways to do this.
How to Borrow Money
The first and logical question when we think about borrowing money is: how do we borrow money?
The borrowing process works like that: you choose a lender, submit a request (one way or another), and wait for the approval. Whether you plan to borrow from friends or go to the bank, this pattern will be the same.
However, it is important to choose the most convenient option for you. For example, someone prefers to borrow from the bank, being present in person and looking into the eyes of the banker. And some people like to use applications and not have personal contact.
Perhaps, in the modern world, the most convenient way would be to borrow money online. For most people, it is important to be able to take the necessary amount of money without leaving their home, without wasting time on the road and in queues.
Fortunately, there are now reliable services that can help you find a reliable lender online, fill out an application form, and get your loan approved in minutes. Often this is available even to people with poor credit scores, and another benefit is speed. The money is in your account the very next day.
Where To Borrow Money: 5 Places That Lend Cash
There are many places where you can borrow money. Depending on your preferences and needs, you can either opt for more traditional places like banks and credit unions or turn to online lenders and cash apps.
Banks
The bank is the first place we think of when we plan to take out a loan. So if you’re not in a hurry, you have a good credit score, and you don’t mind spending more time on the loan process, a bank may be a good option for you.
Most likely, the bank will present more requirements and conditions, but the interest rate will be lower, and the conditions will be more favorable. It is also suitable for those who want to borrow for something specific or for a large amount of money, as direct lenders rarely lend large amounts.
Credit Unions
A credit union is a non-profit financial institution founded by individuals who live in a community. There are also federal credit unions.
Credit unions work on a simple principle: some members put their own funds on deposits or shares, while others take loans at interest.
Credit unions conduct non-commercial activities. Their main goal is to promote their members’ frugality and financial well-being by providing them with financial services at cost.
Combining common features allows you to apply an individual approach. In particular, to coordinate loan payment schedules and terms of deposits.
Unlike banks or other traditional financial institutions, credit unions willingly issue small amounts of money, which is quite important for rural areas. And, given the non-profit activities of the union, the conditions of such a microcredit will be more profitable than a loan from an MFI.
Online Lenders
A feature of online lending is a simplified procedure for borrowing money. Its advantage is the absence of the need to visit banking institutions, sign paper documents, and receive a pile of certificates to confirm the solvency of someone who wants to borrow money.
The lender in such lending is not a bank or credit union but a financial institution whose activity consists in issuing small loans to the population at high-interest rates.
To get an online loan, it is enough to meet the minimum criteria such as US citizenship, a valid ID, and working means of communication. Such a loan will be the easiest and fastest way to get money into your account, but the interest rate will be higher than in all other cases.
Peer-to-Peer Lending (P2P)
P2P lending (from the term peer-to-peer – peer-to-peer system) is a form of lending in which the borrower receives the money directly from another person without involving any financial institutions. Such a service is implemented through specialized Internet portals, where individuals and legal entities act as lenders and borrowers.
In most cases, such loans are unsecured private agreements entered into between individuals. However, sometimes legal entities can also be borrowers or lenders.
P2P lending is very risky since it is impossible to reliably verify the solvency and credit history of the borrower. Therefore, lenders try to minimize the risk by raising interest rates and issuing a large number of small loans to different customers.
401(K) Plans
401k is a retirement savings and financing plan. An employee can deduct up to 15% monthly from his salary to a personal retirement account, but not more than $11,000 per year. The employer also monthly contributes to this account a certain percentage of the employee’s deductions – usually 30-50%, but it happens that all 100%.
5 Ways To Borrow Money
Getting a loan in itself is absolutely normal for a market economy, although a part of the population has certain warnings and concerns about loans, often caused by previous negative experiences. A lack of information about loan products and services often causes it.
So what are the possibilities for Americans to get a loan for their needs, which provides them with how much they need to pay, and which option to raise funds should you choose in a particular case?
There are about five different options. In this case, the choice of source will depend on the needs, capabilities, and knowledge of the borrower. So where do you get the money?
Borrow Money From Friends, Relatives, Or Colleagues
The option is rather banal but real, effective, and often free. Your credit score, in this case, does not matter and you can get money quickly.
We only note that you also need to be able to borrow from colleagues so as not to spoil your relationship with a person and your own reputation. That is, you need to borrow money for a clearly defined period and return it on time. Otherwise, at least they won’t give it anymore.
This is the first thing that comes to mind in most cases, but not everyone and not always has this opportunity. In addition, the amount may be more than you can borrow from friends.
Personal Loans
A personal loan is money that you borrow and that you must repay within a certain period of time. In many cases, you can get a personal loan for whatever you want. For example, you can get a personal loan to cover home improvement costs, pay medical bills, or consolidate your debt. Although lenders usually don’t provide money to spend illegally, you can usually get a loan to cover most expenses.
There are two main types of personal loans:
- Secured Personal Loans
This type of personal loan requires some type of collateral. If you get a loan from your bank, you may be required to deposit a certain amount as collateral. Or you can get a personal loan for your car, apartment, or another asset. If you don’t make payments, the lender may take your property to pay off your debt.
- Unsecured Personal Loans
One of the biggest benefits of getting an unsecured personal loan is that you don’t risk an asset. If you can’t pay, the lender has little choice but to blacklist your account or sue you. You haven’t tied the debt to an asset, so the risk is slightly less for you. However, this may cause lenders to demand a higher interest rate or a better credit score. Remember that when you miss a payment, it is reported to the credit bureau, and your credit score may be lowered.
Payday Loans
If you’ve ever searched for “where can I borrow money asap,” then you’ve probably come across ads for payday loans.
A payday loan is a term for a small short-term loan issued by direct lenders. The issuance of such loans depends on the data on the previous salaries of the consumer and his employment. Payday loan legislation varies greatly between different states or provinces.
Typically, payday loans are issued in amounts up to a thousand dollars for up to 31 days or until the next paycheck is received.
A huge advantage of payday loans is their simplicity and speed of obtaining them. It is enough to meet the minimum criteria, and your loan can be approved within a few minutes, just fill out the form on the site. In addition, direct lenders provide loans even to people with poor or bad credit scores, which can be a real lifesaver in some situations.
However, payday loans have some of the highest interest rates.
Credit Cards
There are two types of payment cards: debit (mainly payroll) and credit when you can make purchases and withdraw funds without having funds in your account. When used correctly, this is a very inexpensive and convenient loan option. Most Americans use it, and it is this tool that is one of the main sources of income for banks.
Regardless of the bank, each credit card has a credit limit – personal, which depends on the level of solvency of the owner and the policy of the bank. The larger it is, the larger the amount you can borrow.
Interest rates on such loans are relatively low, and sometimes you can use this loan for free.
Specific conditions in each bank are different, but all users need to remember: first, get as much information about the terms of the loan, rate, repayment, and commissions. And then, use the card and remember the terms in which you need to repay the loan received.
Home Equity Loans and Home Equity Lines of Credit (HELOCs)
A home equity loan is a credit line secured by residential real estate. It is one of the varieties of mortgage lending in which the lender undertakes to provide the maximum loan amount for a certain period secured by existing real estate.
In other words, an agreement is concluded between the lender and the borrower, under which the property of the second is pledged to the bank (or another lender) in exchange for the fact that the borrower will be able to use credit funds at any time, the maximum amount of which is determined based on the value of the collateral and the characteristics of the borrower.
The borrower, in turn, can take the entire amount or part of it, and he (the borrower) can use the credit line (take funds and give them back) repeatedly during the period specified in the contract.
Some experts see home equity loans as a “salvation” for borrowers who have taken on many loans from various banks and direct lenders, as this system would allow them to collect all loans into one.
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Bottom Line
If you need to borrow money, there are always a lot of different ways to do it. Go to the bank, apply to a credit union or use one of the borrow money apps that allow you to borrow a small amount of money in a few clicks, simply using your mobile phone or tablet.
When choosing the most suitable way to borrow money for yourself, do not forget to check with the lender about the interest rate and hidden fees so that the overpayment does not come as a surprise to you and does not spoil your financial situation.
