Need money for a car, a college class, a mortgage,
or just to get you through to your next paycheck?
You’re not alone.
Currently, 44 million Americans have borrowed for a
student loan. But student loans aren’t the only
debts out there. The New York Fed reports that
total indebtedness for U.S. households has
reached more than $13 trillion, as of the end of
2017.
As Americans, borrowing is in our DNA. Many of us
can’t afford to buy a home or a new car outright,
and without loans, 70% of colleges are unaffordable
for most Americans.
However, borrowing money can be a risky, lengthy,
and emotional process. And you have to be careful
that you don’t borrow more than you can repay.
Knowing who to turn to can help you make the
best decision to suit your financial needs. If you
feel like you need to borrow money to get a leg up
with your finances and your life, here’s what you
need to know:
9 places to get a loan
1. National banks
US Bank, Wells Fargo, Capital One — you’ve heard
these names time and time, again touting their
personal loan programs. In fact, you may already be
a customer with one of these banks, making it even
more attractive to borrow from a business you
trust.
It’s not just the big banks anymore, though. There
are also some great online banks that offer
nationwide service and access to a variety of loan
products.
Why borrow: Big-name banks give you tons of
options. From an array of terms (length), fees,
incentives, and more, you’ll likely find a loan that
works for you. In addition, brand-name banks are
also set up for convenient features such as online
bill pay and may have 24/7 customer service to
assist you.
Why skip: A big name doesn’t mean big service.
Working with national banks could make it difficult
to get a real person on the phone, or you might
end up talking to an inexperienced bank agent.
These people may also not have the flexibility to
grant exceptions or are required to follow strict
rules about credit scores and borrower profiles. You
might find it harder to get a personal loan when
you have fair to poor credit.
2. Credit unions
Credit unions are becoming the popular
alternatives to banks. Usually headquartered within
the community they serve, it’s a great way to
support local businesses and get some small-
business benefits.
Why borrow: On average, credit unions offer
borrowers lower rates than banks. Another huge
plus is location. Instead of having to call when
there’s a question, you can always stop by your
branch to sit down face-to-face with an expert.
Many borrowers like the personal touch of a credit
union — including some degree of flexibility when
making loans.
Why skip: Want to pay online or check your payoff
progress? It may not be an option with credit
unions behind the technology curve. Additionally,
there might be limits to products and services
offered by smaller credit unions. Make sure your
local credit union has what you need.
3. Online fast-money lenders
A loan in your pajamas? You can get a loan fast
with an online lender — sometimes seeing the
money in your account the very next business day.
However, there is much to be cautious about before
taking the money.
Why borrow: It’s fast, easy, and you don’t need to
do much more than put in your information and
wait for approval. It’s also a good alternative if you
have poor credit, as many of these lenders are set
up to work with bad or no credit.
Why skip: Some of these banks may charge insane
interest rates. In some cases, you could find
yourself paying 400.00% APR — or more. Once
you’re in that cycle, it can be hard to break out,
and the fees and costs just keep piling up. In
many cases, you’re better off exhausting other
options first.
4. Peer-to-peer (P2P) loans
One type of online lender that is making a name
for itself is peer-to-peer lending. You apply for a
loan and individuals, not banks, fund part or all of
it. You pay interest and the balance back to them.
Why borrow: Rates for P2P loans are usually very
reasonable and are attractive for a host of different
borrowers. Terms are usually range from three to
five years, making it a great choice if you are
looking for a loan you can pay off quickly and
painlessly.
Companies like Lending Club are making it easier
than ever to find funding when traditional banks
won’t take you.
Why skip: Even though P2P lenders claim that they
help people traditional banks shun, the reality is
that they still have a credit underwriting system.
You might end up with a high interest rate.
Additionally, in some cases, if not enough people
decide to help you by funding your loan, you could
end up getting none of the money and then you’re
back to square one.
5. Retirement plans
Have an employee-sponsored retirement plan? You
may be eligible to take a loan out on your
retirement savings. The IRS has limits on how
much you borrow ($50,000 or half the balance,
whichever is less), but it could be a good source of
quick cash if you’re careful.
Why borrow: It’s technically already your money,
and when you pay it back (usually within five
years), you pay back interest to yourself. Interest
rates are competitive and these loans are a good
alternative if you can’t obtain a loan because of
credit issues.
Why skip: It’s your retirement, and by removing
some funds from your account, even temporarily,
you won’t benefit from compound growth. That
could set you back years from your retirement goal.
6. Cash advances
Let’s say you need your loan to handle an
emergency that requires access to cash ASAP. In
that case, you can take your credit card to the ATM,
request a cash advance, and in seconds have
access to real money.
Why borrow: It’s an efficient method to get cash
when it’s the only thing that will do.
Why skip: In most cases, your interest rate on a
cash advance is higher than your purchase rate. On
top of that, you might be charged an additional
fee. This can make the whole thing more
expensive. However, it can still be cheaper than
getting an online fast-money loan.
7. Private businesses
Need a new couch or a car but don’t feel like
taking time to go through the process at the bank?
Today, businesses that sell big-ticket items can
provide you with a loan for the purchase.
Car dealerships are prime examples, but many
other retailers offer financing as well. Think
furniture stores and big-box stores that offer credit
cards or other financing deals when you buy TVs,
lawnmowers, and computers.
Why borrow: You’re already purchasing from them,
so save the effort and get the loan or instant credit
card on site. These lenders may also offer discounts
on the price or no interest for extended periods of
time if you qualify.
Why skip: Shopping around for loans may show
you that the effort is really worth it. Because these
businesses are the middle man, you don’t get to
see the competitor’s rates and terms. You might be
able to get a better deal elsewhere. In addition,
the person you’re dealing with is most likely not a
loan expert, but a salesperson.
8. Payday lenders
Having limited credit history can mean your
options are especially tight. When emergencies
come up, you may be put in a desperate position.
That’s where payday lenders come in. Using a cash
advance on your pay stub, you can get a short-
term loan for instant cash.
Why borrow: Limited options and serious
emergencies requiring small amounts of money
(usually under $1,000) are the only reasons why
you should consider payday lenders. And, even
then, think twice.
Why skip: Where payday lenders get you is in the
outrageous fees and interest charged. The average
loan term is two weeks with a 400 percent APR or
more (paid in one lump sum at the end). Even
small loans of only a few hundred dollars can add
up to impossible amounts once large fees are
tacked on.
9. Parents and friends
You may not be interested in calling in a loan from
Bank of Mom and Dad, but for those who are in a
jam, asking generous friends and family can be a
solution with limited financial consequences.
Why borrow: The best loans from someone you
know are ones that are written, documented, and
charge some interest (even if it’s only half a
percentage point). This protects both sides from
potential misunderstandings, in addition to
creating a more official, business feel to the deal.
Why skip: Family, friends, and money don’t mix —
and for good reason. Failing to pay back loans can
lead to resentment from a parent or friend, causing
major drama that could hurt your relationships.
Loan choices that work for you
We’ve all been there: the bills need to be paid and
you need cash fast.
Luckily, with the variety of options out there, you
can find the best places to get a loan that fits your
needs.
When loan shopping, be sure to come prepared and
ready to look for red flags such as high borrowing
fees, large interest rates, and inflexibility by the
lender. By investigating the best place to get a
loan when you need money, you can reduce what
you pay overall and avoid getting taken advantage
of.
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