Great Ways to Borrow Money When You Need It

You think you have everything squared away. Your rent is paid. Your student loans are covered for the month. You even have some extra cash to try out the new craft brewery with your friends this weekend.

Then, suddenly a financial disaster strikes. Maybe your beloved dog gets sick or maybe your faithful old clunker of a car suddenly breaks down. All you know is that you need money and you need it quickly.

Of course, there are a number of reasons you might need a sudden infusion of cold hard cash that don’t involve trips to the pet ER or the mechanic. Maybe you want to refinance your credit card debt. It doesn’t matter as much why you need money as it matters where you’re going to get it.

After all, there are lots of options for accessing extra cash when you’re in a pinch, from scrounging beneath couch cushions to asking friends or family for a loan to resorting to credit cards and personal loans. But it’s important that you know the pros and cons that come with hitting up your old college roommate for a few bucks or swiping your high-interest credit card.

Credit Cards

The biggest benefit of using credit cards is that they’re right there in your wallet! Need money right now? They make for a timely solution. Looking to go on a trip later in the year? Even better, you can earn reward points by charging your expenses to your credit card. But those are just about the only benefits of using your credit cards when you need cash.

The downsides are enough to keep you up at night. First, there are the high interest rates that most credit cards charge you. That gets expensive quickly and can make it more difficult to repay your credit card debt.

In addition, putting a big expense on your credit card could impact your credit score even if you make your minimum payment every month. That’s because one part of your total credit score is calculated based on how much of your available credit you’re using.

So while it might make sense to put the expense on your credit card initially if it’s an emergency, you’ll probably want to find another way to borrow money and pay it off.

Asking Friends and Family

What’s that proverb about how borrowing money from friends and family always end badly? Oh yeah, it’s: “Before borrowing money from a friend, it’s best to decide which you need most.” Good advice. That’s because while your friends or family might be likely to lend you money if you need it, taking them up on their offer or asking for a loan could end up souring the relationship.

Of course, how it turns out will totally depend on the relationship in question and things like your friend or family member’s financial situation, and how quickly you pay them back. Some family members might actually appreciate you coming to them for help, but there might also be strings attached to their assistance.

For example, you might suddenly be expected to call home more often or your friend might get annoyed with you if he or she sees you out for dinner at an expensive restaurant when you still haven’t paid them back.

If you do decide to hit up a friend or family member, it’s a good idea to manage expectations at the start and create a timeline for repayment that you’re certain you can stick to. If something comes up, try to communicate to them right away that you might need a little extra time to finish repaying them.

Traditional Bank Loans

Considering a bank loan? It’s time to get dressed up and head into your local bank branch. If you’re hoping to qualify for a bank loan, you should know exactly what type of loan you’re seeking, what your ideal interest rate and loan term would be, and how quickly you need the loan. In order to qualify for a competitive interest rate, you’ll want to show that you have an excellent credit record and a robust income.

The benefits of a bank loan are that you’ll have a relationship with the banker and your branch that might come in handy if you ever want to continue borrowing from said bank, in the form of a mortgage, for example.

Lines of Credit

A line of credit is a revolving credit line similar to a credit card. Sound complicated? It isn’t as difficult to understand as it seems. Whereas a personal loan gives you a lump sum from a fixed amount of funding, a line of credit gives you a maximum amount you can borrow. You make a minimum payment each month on the amount that you owe and once you pay off part of your balance, you free up more credit that you can borrow against again.

There are secured lines of credit (like a home equity loan, which uses your home to “secure” your debt) and unsecured lines of credit, usually called a personal line of credit.

A personal line of credit may have some advantages when compared to a credit card. Because they tend to have much lower interest rates, especially if you get a home equity line of credit (HELOC), it may end up saving you money on interest.

What are the downsides to a line of credit? It’s harder to access the money than if you use a credit card, and you potentially have to put your home’s equity up as collateral (which means you could lose your home if you can’t pay back the loan). They also come with variable interest rates, which means your interest rate may start low, but then climb depending on market fluctuations.

Secured Loan

A secured personal loan is a loan that uses one of your assets as collateral. For example, you might have to put up your home or your car in order to take out the loan.

One key benefit of a secured loan is that they tend to charge less in interest than unsecured loans. You also are more likely to qualify for a secured loan if you have assets to use as collateral.

The downsides of a secured loan are fairly obvious. If you default, your lender can foreclose on your home or repossess your car. In addition, it can take longer to be approved for a secured loan, and you probably won’t be able to qualify for one if you don’t have any major assets (like a house or car). In addition, if you find a low-interest unsecured personal loan, you could be paying around the same without all the hassle.

Unsecured Personal Loan

An unsecured personal loan is a fairly straightforward loan option. Want a low interest rate? While rates vary widely, you can often find lower rates from online lenders if you have good credit and you make a good income. Don’t want to lose your house or car in case you default? No worries—unsecured loans require no collateral as security! Want more flexible term lengths? Check! Many lenders offer a variety of terms.

Unsecured personal loans can allow you to get the money you need quickly and easily. There are many online lenders who will process your loan application within minutes and get you your cash within a day or two.

The downside of unsecured personal loans is that it might be harder to get one if you don’t have good credit and a steady income. So if you do qualify, you might not be able to borrow as much as you need. Also, interest rates can vary widely and depend heavily on the lender you choose.

Great Ways to Borrow Money… for You

Ultimately, a great way for you to borrow money will depend on things like how quickly you need the cash, your credit history, and your personal financial situation. If you happen to be your rich grandparents’ favorite grandkid, that might also factor into your decision. But if your Nana doesn’t fly in private jets, don’t worry!

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website on credit .
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