Money tends to run out in the most unexpected way. Even if you have the perfect budget, a money shortage can make it fall apart. So, to gain control over money it’s okay to get a little outside financial help at times. To know where to borrow and what the most lucrative ways to borrow are is a profitable skill. Let’s look at conventional and cutting-edge ways to borrow money in 2023.
#1 Banks
Banks offer traditional lending options. Borrowers turn to banks to apply for a mortgage, car loans, business loans, personal loans, and other loan types. Those borrowers who need to consolidate debt or refinance their loans can also find assistance at regular banks.
People who already have a banking account at the local bank find it easier to borrow on-site. They trust their financial advisor and bank staff to support them in the loan process and loads of paperwork.
However, the service that borrowers get at their bank has its cost and it’s usually a high one. There are bank origination fees, application fees, and other charges that may occur during the loan process. Also, banks can resell the borrower’s loan to other financial institutions and the borrower has to pay additional fees.
#2 Online Lenders
Alternative lenders have gained the reputation of being miracle workers to people applying for all kinds of loans. They usually issue unsecured loans, so borrowers who don’t have collateral can’t apply as well. Alternative lenders perform a soft credit check and allow loans to borrowers with low credit scores.
These lenders offer various types of loans that are custom-made for different needs, e.g. medical loans, wedding loans, adoption loans, LASIK surgery loans, house restoration loans, etc.
However, one should be really careful about loan rates. Online creditors equip their borrowers with affordable rates, but only good or excellent credit scores receive low interest rates.
#3 Loan Apps
There’s an abundance of financial apps today. Their biggest advantage is that the money is available from your smartphone or another mobile device 24/7. The application is even faster than with online lending websites. Loan apps are extremely versatile concerning loan amounts. Online borrowers can apply for as little as $50 and as much as $5000.
The top benefits of loan apps are security, speed, and convenience. Despite their simplicity, loan apps are equipped with encryption and the user’s data is safe. The application takes under a minute and the approval waiting period is minimal. Finally, when taking out loans via an app, you don’t have to collect financial documents, or even leave your house. There is a selection of top loans apps of 2023 at Fit My Money blog to check out their rates and terms.
#4 Cash Advance
Many creditors are ready to give out short-term loans (cash advances) these days. Merchant cash advances can also be found among creditors. They work similarly to payday loans or business loans.
Credit card companies offer their clients cash advances. Despite the fact that cash advance is easy to be approved for and extra funding appears on the banking account almost immediately, they typically come with high rates and fees.
One should remember that cash advance doesn’t affect the credit score directly, but it enlarges the outstanding balance and credit utilization ratio which eventually reflects on the credit score.
#5 Pawnshop Loans
Pawnshop offers secured loans. Pawnbrokers offer loans depending on the worth of the item the borrower brings them. The pawnbroker has the valuable item in his possession until the borrower repays the loan. The item’s value doesn’t guarantee the exact amount of the loan. It’s merely a fraction of the sum.
Some customers choose to sell their valuables to pawnbrokers. This option might work, but it’s less profitable for the pawnshop owner.
Within the loan period (1 to 4 months) the borrower returns the loan balance plus the interest and possible fees. If the borrower doesn’t repay the loan in time, he can’t collect the item.
#6 Peer-to-Peer Lending
Peer-to-peer lending, aka crowdlending, is a process of borrowing money, usually between two individuals without involving a third party, such as a lender or a bank broker.
The two parties meet at a special P2P-lending website, where they have their profiles. The borrowers have to specify the desired loan amount and affordable interest rate straight away. The personal lender may agree to those terms and lend his own money judging by the borrower’s profile.
A borrower can receive loan money from either one or multiple lenders. This borrowing strategy is good for those borrowers who can’t get qualified for loans at regular credit unions or lending places. Nevertheless, borrowers are advised to check the website for additional fees.
#7 Borrowing from 401(k)
What can be more beneficial than borrowing from yourself? Many borrowers tend to tap into their retirement plans in time of need. The majority of 401(k) plans allow people to borrow up to 50% of the funds in the account with a loan period of up to five years.
The rates on such loans are comparatively low. In addition, you pay the interest to yourself. However, one should be extremely careful with 401(k) loan repayment. In case the payments are not regular, the IRS could classify such a loan as a distribution and charge penalties and tax on it.
#8 Borrowing from Friends and Family
This option may seem the easiest one. You can ask a relative or a friend to lend you money with low interest. First, it would be less harmful to pay the interest to someone you know. Second, a friend or a family member will agree to a loan extension faster than a lender.
However, not to lose any relationships over money, borrowers should be disciplined about repaying such loans as well: specify the payment amount each month, write down the loan terms, decide on the payments’ delivery (check, cash, bank transfer).
#9 0% APR Credit Cards
Credit cards are great for all kinds of purchases and expenditure items. They are widely used by millions of people because of their flexible policy of rates: you only pay the interest on outstanding balance, not the whole credit limit.
Those cards with 0% APR offer their clients a period of card utilization without any interest. The period is usually from 12 to 21 months. The 0%APR may be used either for purchases or money transfers, whatever fits your needs best.
Borrowers should determine their needs and use such cards responsibly. Plus, they should choose the card according to the length of the 0% APR period and mind the interest rate upon the end of that period.
#10 HELOC or Home Equity Loans
Home equity loans are those borrowing options that are secured by the borrowers’ home equity. Due to a secured type, home equity loans have lower interest rates. The rates are fixed and usually about 5%. HELOC loans come with a variable rate and can be over prime by 2%.
Home equity loans allow receiving a large sum of money, but the borrower has to start repaying the interest immediately. HELOC borrowers receive a certain amount of money that fits their current needs and the interest is calculated only on a withdrawn fraction of money. Despite the clear risk factor of losing your house, this type of loan is favored by many borrowers.
Looking back at the top ten ways to borrow money in 2023 a conclusion can be made: people are starting to move their money transactions online and are acquiring more convenient and paperless ways to borrow money. One should only consider what matches his needs best and how much he’s ready to pay back.
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