A vacation can be stressful if you don’t know your options if you need extra cash to pay a medical bill, consolidate credit card debt, or pay off a loan.
The following options and their advantages and disadvantages are five different ways to borrow money.
As we explore each option, we can help you figure out what to think about before borrowing money is the right choice.
Banks
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Bank personal loans may appear appealing. Many banks, for instance, do not charge origination fees for loans. Lenders often charge an origination fee that ranges from 1% to 8% of the loan amount, and they say it covers the costs involved in processing your application and paying the loan proceeds.
As an existing bank customer offering this benefit, you may also be eligible for a discount on interest rates. You may qualify for bank loyalty discounts on personal loans when you keep qualifying bank accounts.
You should also know that some big banks do not provide personal online loan app.
Moreover, some banks will only approve you for a personal loan if you have good or excellent credit.
See our picks for the best personal loans from banks.
Credit unions
Credit unions may be able to provide a better personal quick loan than banks. How so?
It may be more economical to bank with a credit union than with a bank. Due to their nonprofit status, credit unions are more concerned with returning profits to their members than shareholders.
Getting into a credit union can be a challenge if you do not meet its eligibility requirements. Some examples include living in a specific county, attending school or working for a certain employer, or having family ties to a currently employed member.
Online lenders
Digital technology has spawned alternatives to traditional financial institutions such as banks and credit unions in the form of online lenders.
Online lenders do not have to maintain physical branches. These apps are often well designed and offer the kind of 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.
But if you’re not familiar with the lender, research its reputation online and check with traditional lenders to see if they can offer better interest rates and terms.
Check out our picks for the best online personal loans.
Payday lenders
A payday loan is a short-term loan for an amount that’s typical $500 or less. You can apply for local payday loans online or at a payday loan storefront. But payday loans are an expensive form of financing, and because of that, they should only be considered a last-resort funding option.
A payday loan typically must be repaid by the next payday after borrowing. Terms and rates vary by state, but a payday lender usually charges a percentage or dollar amount for each $100 borrowed. The Consumer Financial Protection Bureau says a common scenario is a fee of $15 per $100 — that works out to an annual percentage rate of nearly 400% for a two-week loan.
And if you’re unable to pay the loan and the fees, the lender might extend the payment due date, adding even more fees to the original amount owed.
Pawnshops
A pawn shop loan differs from a traditional personal loan: A pawn loan involves no credit check or application process. The amount of money you borrow from a pawn shop is based on the value of the item you’re pawning. According to the National Pawnbrokers Association, the average pawnshop loan in the U.S. is $150.
While a pawnshop loan can be a quick source of cash when you need money, this form of borrowing can be problematic. Interest rates are often high — commonly ranging from 5% to 25% — and various fees might be tacked on. And if you fail to pay off the loan when you’re supposed to, the pawnshop can sell the item you pawned. Consider all your options before proceeding with this kind of loan.
