Best ways to borrow money

How to find cash when you need it

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Sometimes you wind up in situations where you need money you don’t have. You might need to borrow money in order to consolidate your debt, pay for an unexpected medical expense or complete a home renovation. Whatever the situation is, you can borrow money in different ways.

Whether you go the traditional route and borrow a personal loan from a bank or credit union or try an alternative method like crowdfunding, you have options. You may even consider reaching out to a friend or family member. Each method can help you secure the cash you need, but there are benefits and drawbacks to consider.

Key insights:

  • To qualify for the best interest rate on a personal loan, you’ll need a good to excellent credit score.
  • If you have a poor credit score, you might consider alternative borrowing methods like crowdfunding or borrowing from a friend.
  • To prevent paying extremely high interest rates, avoid borrowing with payday loans and credit card cash advances.

Traditional ways to borrow money

You have access to various products when you use a traditional source to borrow money. In addition, you'll have access to top-notch credit rates if your credit is excellent. However, you'll need to meet sufficient criteria like a good to excellent credit score to access these options.

Personal loans

Doug Carey, a financial analyst and president at WealthTrace, lists the personal loan as one of the best ways to borrow money. He says one of the benefits of a personal loan is you can use it for whatever you want.

A personal loan can help you fund a large or unexpected project or expense.

You can borrow a lump sum from a bank or other financial institution with a personal loan. You are responsible for repaying the total amount plus interest and associated fees over a predetermined time period. Most personal loans are unsecured, meaning you don't have to provide an asset as collateral to borrow.

A personal loan usually comes with a lower interest rate than a credit card. However, your exact rate will depend on variables such as your credit score, income and debt-to-income (DTI) ratio. If you have a poor credit score or limited credit history, you may need a co-signer to get a personal loan with a reasonable rate.


Banks provide a wide range of financial products, from auto loans to mortgages and small business loans. And banks are required to adhere to strict lending standards, so they’re a completely safe option if you decide to borrow money from them.

As a perk, banks tend to have a wider reach, with more branch locations and ATMs than credit unions. And if you like using mobile financial apps for convenience, a bank is more likely to provide this option.

Unfortunately, those who don't have stellar credit might need help getting loans with low interest rates. You may also pay higher fees than at a credit union.

Credit unions

Credit unions are another great option for traditionally borrowing money. A credit union is a not-for-profit organization owned and controlled by its members.

To become a member of a credit union, you have to meet specific eligibility requirements. For instance, you might need to live within a certain geographic location or work for a certain employer.

The benefit of borrowing from a credit union is you can often find lower borrowing rates and fees. Plus, the profit made by the credit union is returned to the members.

Credit cards

A credit card is a convenient way to get quick access to money. Securing a 0% annual percentage rate (APR) credit card and paying it off before the end of the intro APR period (typically 12 to 15 months) is one way to save on interest. Using a 0% APR balance transfer credit card might also help you to pay off your debt faster since you won’t have any interest payments.

However, you typically need good to excellent credit to qualify for these types of cards. And, if you aren’t able to pay back the money you borrow by the end of the intro period, you’ll have to pay your debt back at a much higher interest rate, potentially higher than with a personal loan or other borrowing option. Always read the fine print before deciding whether or not to use a credit card to borrow money.

» MORE: Personal loan vs. credit card: Which is better?

Nontraditional ways to borrow money

If you don’t have the credit score you need to borrow money more traditionally, you might need to seek other ways of securing funding. Nontraditional ways to borrow money are great because they don’t rely on a credit score for you to get what you need. These include:


Crowdfunding platforms allow many people to contribute small amounts of money to fund various personal projects and businesses. You might see people using crowdfunding sites to ask for financial help to cover a family member's unexpected medical expense or to help make ends meet after a natural disaster.

The benefit of crowdfunding is that it is a convenient way to try and access money. It's all done online, and there's no formal application process. The drawback of crowdfunding is you may have to pay setup fees or a commission to the crowdfunding site. Sometimes, you only get the money if you hit your funding target within a specific time frame. You could spend time and money setting things up for nothing in return.

Friends and family

If you’re lucky, your friends and family might be willing to lend you money. When someone you know lets you borrow money, you generally don’t have to go through a formal application process — but they might have requirements that are different from traditional lenders, like making a certain GPA in school or paying them back once a week. You also might work out a deal where you don’t have to pay any interest — or you pay a much lower rate than if you borrowed from a more traditional source.

However, things can get complicated. For example, suppose you borrow money from a family member or friend and fail to pay them back. In that case, you risk upsetting an important relationship. A contract outlining the terms and conditions of your loan agreement can help protect you and the person you're borrowing from.

Buy now, pay later apps

A buy now, pay later (BNPL) app, also known as a point-of-sale loan, allows you to purchase something today and pay for it over time. Many retailers offer customers the option to BNPL when they check out online or in-store. Rather than paying a lump sum of money for a new pair of shoes or a laptop, you can choose to pay in installments over a few weeks or months.

In addition, many apps only require a soft credit check or no credit check at all. Some apps also don’t charge interest as long as you pay your installment on time. However, the borrowing limits are often lower than you may have access to with other borrowing options, like a personal loan.

Avoid these ways of borrowing money

Unfortunately, only some lending options are good ones. When you’re looking to borrow money, there are a couple of options you should always try to avoid. These borrowing options tend to have very high interest rates and can be challenging to pay back.

Payday loans

A payday loan, also known as a cash advance loan, is a short-term loan with high fees. Payday loans are relatively easy to access, as no credit check is required, and the loan is unsecured. However, just because a loan is easy to obtain doesn’t mean it is a safe lending option. Carey, the WealthTrace president, categorizes a payday loan as “one of the worst ways to borrow money.”

A payday loan is one of the worst ways to borrow money.”
— Doug Carey, President, WealthTrace

Because of the predatory nature of payday loans, some states have fee and rate limits on this type of borrowing. According to the Consumer Financial Protection Bureau, if you were to take out a two-week loan with a fee of $15 per $100 borrowed, the APR would equate to nearly 400%.

» MORE: 11 payday loan alternatives

401(k) loan

Some employer-sponsored 401(k) plans are set up to allow you to borrow money from your retirement savings account without paying taxes. Typically, you can borrow up to 50% of your vested retirement savings to a maximum of $50,000. You must repay the loan within five years unless you use the money to purchase your primary residence.

Borrowing from your 401(k) means you take a loss on any investment gains you could have made while that money was invested. Choosing to do this might also delay your retirement plans. If you don’t pay the loan back on time, your loan is considered taxable income, and you also may have to pay a 10% early withdrawal fee.

Credit card cash advance

You can borrow money using a cash advance if you have a credit card. A cash advance allows you to withdraw money and pay it back later. While it's a convenient way to borrow money, it's also expensive.

When you take out a cash advance, you have to pay the money back at an interest rate higher than your regular credit card rate. Unlike with purchases on your credit card, there is no grace period for when you start to pay interest.

In addition, you can expect to pay a cash advance fee — either a flat fee or a percentage typically ranging from 3% to 5% of the total amount of cash you advance.

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What are the fastest ways to borrow money?

Fast ways to borrow money include taking out a personal loan or asking to borrow money from a friend. Taking on a payday loan or credit card cash advance are also fast options but should be avoided if possible.

Can I borrow money if I have bad credit?

It is possible to borrow money if you have bad credit. Many borrowing methods, like crowdfunding or borrowing from a family member, don’t require a credit check. Even with more traditional borrowing methods, it is still possible to borrow money. For instance, you can look for lenders that accept lower credit scores or apply for a secured personal loan.

When should I borrow money instead of using savings?

Using savings is often better than borrowing money to avoid interest payments or the potential of going into debt. In some cases, it can make sense to borrow money. When deciding if you should borrow or use savings, consider what you need the money for and how urgently you need the money, as well as what interest rate you would pay.

Bottom line

If you need cash, there are several ways to borrow money. More traditional borrowing methods include taking out a personal loan or borrowing from a bank or credit union. Using an alternative borrowing method, like crowdfunding, borrowing from a family member or friend or using BNPL can allow you to bypass the more traditional application process. Try to avoid payday loans and credit card cash advances so you don’t end up paying excessive interest and fees.

Article sources
ConsumerAffairs writers primarily rely on government data, industry experts and original research from other reputable publications to inform their work. Specific sources for this article include:
  1. Consumer Financial Protection Bureau, “ What is a payday loan? ” Accessed Oct. 23, 2022.
  2. IRS, “ 401(k) Resource Guide - Plan Participants - General Distribution Rules .” Accessed Oct. 23, 2022.
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