In a Nutshell
If you want to borrow money, there are a lot of options out there — each with its own pros and cons. Whether you need to finance emergency medical expenses or home improvements, it’s important to look at multiple options to find the best one for your situation.There are several different options available to borrow money. Whether you’re looking for extra cash to consolidate credit card debt, pay a medical bill or take a vacation, the right choice for you depends on your financial situation.
We’ve rounded up different borrowing options, along with the advantages and disadvantages of each.
Let’s walk through each option so you know what to consider before you decide if borrowing money might be best for you.
- Personal loan from a bank, credit union or online lender
- Cash advance from an app or credit card
- Low-interest credit card
- Home equity loan or HELOC
- Less-common options for borrowing money
- FAQs about places to borrow money
Personal loan from a bank, credit union or online lender
Getting a personal loan is one of the most common options for borrowing money. If this is the option you’re considering, there are several different types of places that offer personal loans. Here are the pros and cons of getting a personal loan from a bank, credit union or online lender.
Personal loan from a bank
Pros of borrowing money from a bank
Banks often offer a range of options for borrowing money, from personal loans to mortgage options. Some bank loans come with perks — you may not be charged a loan origination fee, for example. An origination fee often ranges from 1% to 8% of the loan amount — lenders say it covers administrative expenses for processing your application and paying you the money.
You may also qualify for an interest rate discount — sometimes referred to as a relationship discount — if you’re an existing customer at a bank that offers this perk. Some banks offer loyalty discounts on personal loan interest rates if you maintain qualifying bank accounts.
Cons of borrowing money from a bank
Keep in mind that some big banks don’t offer personal loans at all, so you may have to look for an option outside of your bank. And some banks may require you to have a minimum of good or excellent credit to get approval for a personal loan.
See our picks for the best personal loans from banks.Personal loan from a credit union
Pros of borrowing money from a credit union
A personal loan from a credit union might be a better option than a personal loan from a bank. Why?
A credit union may offer lower interest rates and fees than a bank. Since credit unions are nonprofits dedicated to serving their members, their goal is to return profit to members instead of shareholders.
Some credit unions also offer payday alternative loans, which are short-term loans for small amounts designed to help members avoid costly payday loans.
Cons of borrowing money from a credit union
One drawback is that you must meet a credit union’s eligibility requirements in order to become a member. This can include residence in certain counties, a connection to a specific school or employer, or family ties to a current member.
Personal loan from an online lender
Pros of borrowing money from an online lender
Online lenders don’t have the costs that come with maintaining physical branches. And they often offer the user experience that people have come to expect from digital loan applications.
Many online lenders promise fast funding, with money deposited into your bank account in as little as one or two business days if you’re approved.
Cons of borrowing money from an online lender
There’s a wide range in the types of loans you can get from online lenders. If you’re not familiar with an online lender, research its reputation and check with traditional lenders to see if they can offer better interest rates and terms.
Some online lenders offer loans with terms that are similar to payday loans, so make sure to read the fine print carefully before accepting an offer.
Cash advance from an app or credit card
Another way to borrow money — especially a smaller amount of money that you intend to pay back as soon as possible — is to get some sort of cash advance. There are a couple of different ways to get an advance, including through apps or credit cards — though whichever method you choose has fairly different costs associated with it, plus they may have specific requirements for qualification. Here are the pros and cons of each option.
Cash advance from a paycheck advance app
Pros of borrowing money from a cash advance app
If you find yourself quickly needing a small advance on your next paycheck to tide you over during a financial emergency, a number of companies offer small cash advances that can come with favorable terms compared to traditional payday loans.
These companies often have mobile apps, and they’ll advance you up to $500 a pay period if you meet qualifications.
Cons of borrowing money from a cash advance app
Some of these apps may come with a monthly membership fee, while others ask for optional tips to use their services. To use one of these apps, you may need to connect your bank account or share information about your paycheck — or the service may only be available to employees of certain companies.
See our picks for the best apps that loan money.Cash advance from a credit card
Pros of getting a cash advance from a credit card
Using a credit card to access cash can seem like an appealing option. Since you already have the card, you don’t have to fill out an application or go through a credit check to get what essentially is a short-term loan against the line of credit available on your credit card. Plus, you can typically access the money quickly.
If you’re planning on getting the advance directly from an ATM, you’ll need to use a credit card PIN, which you should be able to set up directly with your issuer if you don’t already have one in place. Alternatively, banks that do business with a specific issuer will likely offer cash advances from a credit card as long as you visit in person and can show a government-issued photo ID.
Cons of getting a cash advance from a credit card
The simplicity of a credit card cash advance can come at a price. Some card issuers charge a fee to get a cash advance along with an interest rate that’s usually high. Also, most credit cards don’t offer a grace period for cash advances, meaning that the interest charges start the moment you withdraw the cash.
Cash advance from a buy-now, pay-later app
Pros of borrowing money from a buy-now, pay-later app
If you’re looking to spread out a large purchase over several months, a loan from a buy-now, pay-later app is another option to consider. These apps partner with retailers and even airlines and hotels to help you finance these purchases.
Cons of borrowing money from a buy-now, pay-later app
You’ll want to consider any fees you may be charged for late payments — which may also affect your credit scores negatively.
See our picks for the best buy-now, pay-later apps.Low-interest credit card
Some credit cards offer intro periods with low or no interest. If you plan to pay off a purchase or debt within a specific time period, this could be a good option.
0% intro APR credit card
Pros of borrowing money from a 0% intro APR credit card
Credit cards with zero-interest offers can help you save a lot of money. These cards typically have a period of time where you’ll pay 0% interest on either purchases or balance transfers (or both). This allows you to make a big purchase that you plan to pay off over time — or you can transfer high-interest debt to the card and pay it off within the intro time frame. If this choice fits your borrowing needs and you’re able to pay off your purchase or debt before interest hits, this is one of the lowest-cost options available.
Cons of borrowing money from a 0% intro APR credit card
Though you won’t be on the hook for interest during the intro period, you’ll still need to make payments on time or you could be hit with late fees and penalty rates. And if you’re unable to pay off what you owe by the time the intro period ends, you could get hit with higher interest rates than you’d see with some of the other options on this list.
Home equity loan or HELOC
You have a couple of options if you want to borrow against the equity you have built up in your home.
Home equity loan
Pros of borrowing money with a home equity loan
With a home equity loan, you can typically borrow up to 85% of the equity you’ve built up in your home, so you may be able to borrow a large amount of money. This makes home equity loans a good option for major expenses, like home renovations. These loans also typically have fixed interest rates, so you’ll be making steady payments over the life of the loan.
Cons of borrowing money with a home equity loan
As with any secured loan, you’re putting the collateral at risk of seizure if you’re unable to make payments on the loan. In this case, since the collateral is your home, that’s a significant risk. If you’re not certain you’re able to make loan payments on top of mortgage payments and other bills, this isn’t a good option.
HELOC (home equity line of credit)
Pros of borrowing money with a HELOC
HELOCS, like home equity loans, require you to have some equity in your home before you can borrow money. A HELOC allows you to continuously borrow money over a set period of time — and you may not have to make payments on what you borrow right away.
Cons of borrowing money with a HELOC
Like a home equity loan, your home is at risk of foreclosure if you’re unable to pay off the HELOC. Plus, depending on how your HELOC is set up, you may have to pay off your entire line of credit all at once. Interest rates on HELOCs can be variable, so you could be at the mercy of market conditions when it comes to the total cost of the loan as well. It’s key to understand the terms of your agreement before agreeing to a HELOC.
Less-common options for borrowing money
If none of these options are for you, there are still a couple of other ways you can borrow money, though the viability of each of these choices varies significantly from person to person.
Borrow from your 401(k) retirement account
Pros of borrowing money from your 401(k)
If your 401(k) plan allows loans, borrowing money from your employer-sponsored 401(k) requires no credit check and could be a low-interest way to quickly access the needed cash. Traditionally, a 401(k) loan allows you to borrow up to $10,000 or 50% of your vested account balance with a cap of $50,000, whichever is greater.
The loan must be repaid within five years, and the interest you pay on the loan goes back into your 401(k).
Cons of borrowing money from your 401(k)
Though accessing cash from your 401(k) sounds simple, consider some of the consequences. For instance, if you leave your job, you could be forced to repay the loan in full before your next federal tax return is due. If you can’t repay the loan, you might be hit with tax penalties.
And don’t forget that you’ll be missing out on investment returns on money you pull out of your 401(k).
Borrow money from family and friends
Pros of borrowing money from family and friends
Getting a loan from a family member or friend may seem like an uncomplicated way to get cash when you need it. After all, a family loan might come with no contract — or a basic contract — and you might get a very favorable interest rate even without excellent credit.
Cons of borrowing money from family and friends
Things can get complicated if a dispute arises over repayment of the loan. What if you still owe $5,000 to Aunt Denise? That can cause a lot of awkwardness. Another drawback: Since your friend or relative can’t report your loan payments to the three major credit bureaus, you won’t reap any credit-building benefits.
FAQs about places to borrow money
It’s common to borrow money from a bank, credit union or online lender. Depending on how you want to use the money, there are also other options, like using a buy-now, pay-later service or credit card to pay for certain purchases. Learn more about different types of loans.
It’s best to avoid high-cost loans like payday loans or title loans, which can put you in a cycle of debt that’s difficult to escape. We recommend considering other options, like payday alternative loans or cash advance apps, before turning to such a costly choice.
Apps to borrow money include Earnin, Dave and Brigit, among others. These apps can come with fairly low-cost service fees or options to tip, but they’re not necessarily available to everybody. Learn more about the best apps to borrow money.
Some personal loan lenders promise fast funding, even as soon as the same day — but some loans can have high interest rates, so make sure to check the terms of the loan before signing any agreements. And apps that lend money can have a quick setup process as well, but it’s a good idea to check eligibility requirements for an advance through any platform before disclosing your personal info. See our picks for the best loans for emergency cash.
Next steps
Whether you need fast cash or a long-term loan, you should take the time to research loan options and ask questions before you borrow money. Here are some key questions to think about.
- Why do I need the money, and which type of loan best fits that need?
- What is the interest rate?
- Are there any fees associated with the loan?
- How long do I have to pay back the loan?
- What happens if I can’t pay back the loan?
- Will a creditor perform a hard credit check that will affect my credit scores?
Try to stay away from expensive forms of borrowing like title loans and payday loans if at all possible.
*Approval Odds are not a guarantee of approval. Credit Karma determines Approval Odds by comparing your credit profile to other Credit Karma members who were approved for the personal loan, or whether you meet certain criteria determined by the lender. Of course, there’s no such thing as a sure thing, but knowing your Approval Odds may help you narrow down your choices. For example, you may not be approved because you don’t meet the lender’s “ability to pay standard” after they verify your income and employment; or, you already have the maximum number of accounts with that specific lender.