What You Should Do If You Need To Borrow Money Fast
Posted on January 1, 2021 in Loans
Taking out a loan is something that just about every adult will do in some form or another during their lifetime, and most likely several times at that. However, rushing it can end up doing more damage in the long run so it is important that anyone that needs money fast does not rush into the first offer they have, taking the time to weigh their options evenly between the several choices available.
Here are just a few options if you need to borrow money fast, and select Turbo tips to help keep you out of risky lending.
Personal Loan From Bank or Credit Union
This option is arguably the safest and most risk-friendly, but it is also the most time consuming on this list. If the money is needed immediately then this loan is not the best one to consider. However, if the situation is not dire and can wait for a few days or maybe a week, then this option should be the one to go with for a few reasons.
A personal loan form a bank or credit union will usually have a term limit of around 24 to 72 months to be repaid, which has the added benefit of a lower interest rate as a result. Now, this option will require a credit score check, so the terms and conditions will vary from individual to individual, but for the average interest rate of a personal loan is just under or just over 10%, which will be much lower than most other options for quick loans.
Also, this loan is considered one of the safer options as it is a fixed loan, meaning that the balance starts off at the maximum and is divided evenly into identical monthly payments for the duration of the loan term. Any more money needed would require a new loan with new terms so it has a less likely chance of snowballing into several large loans like some other options may end up offering.
Although this option does require having a credit card to start with, it is still a very good option for getting access to money fast. Even if one does not possess a credit card, the application and approval process for most major credit card companies like Visa, MasterCard, and Discover only takes minutes online, and although the physical card may not arrive in the mail for around 7 to 10 business days, the account can still be used in some situations.
However, using a credit card when in desperate need for cash can still have some drawbacks to consider. A credit card is considered to have revolving credit, which means that as long as the account is open, the amount of credit, balance, and minimum payments will go up or down depending on the total amount charged via the card.
Now, as a result of not being a fixed loan, the interest rates are typically several percentage points higher than that of a personal fixed rate loan. The average credit card interest is around 18% for new offers and about 14.5% for existing accounts.
As a result, using a credit card would be much faster than getting a loan but will probably cost a little bit more money in the long run.
Credit Card Cash Advance
In the case of needing literal cash instead of credit, there is the option of taking out a cash advance on an existing credit card. This option sort of works like a mix between a personal loan and using a credit card as intended, but it does come with a few quirks to keep in mind before going through with it.
Most of the time, the card issuer will impose a fee for cash advances that may vary from a flat fee of $5 or $10 but could be 3% to 5%, so the higher the advance, the higher the fee. In addition to these fees, the interest rate charged on a cash advance can be much higher than the one added to traditionally charged purchases although that can vary significantly between credit card issuers.
Yet another thing to keep in mind is that while credit cards used traditionally often have a grace period (at least 21 days) where interest does not start to accrue, a cash advance immediately factors in the interest meaning that paying it back quickly will not help prevent the interest.
Peer To Peer Lenders
This option is a relatively new approach compared to some of these other time tested options but that does not mean it should be discounted.
Peer to peer lending, also known as marketplace lending, is an online system where individual investors will fund portions or the entirety of a loan to individual borrowers. So, instead of adding in banks or financial institutions, this is basically taking a loan from another person with essentially the same terms and conditions found in traditional personal loans.
Some of the benefits of this option are that credit may or not be a factor in the individual investor’s decision to fund the loan, and they can be much faster to get approved and get the funding that traditional personal loans offer.
However, the peer to peer lending platforms being used online will often charge a fee for setting up the deal, and it is typically around 1% of the amount of payments received. There are still some risks involved as none of the loans are insured by the Federal Deposit Insurance Corporation, but overall this is a pretty safe option as long as the specific terms and details are read thoroughly and understood.
Most people that are working have some kind of retirement plan set up through their employer, with the most common option being the 401(k). Borrowing from this retirement plan for some quick cash is relatively fast and fairly simple. Added benefits are that there is no credit inquiry used that can lower a credit score because the individual’s credit score does not matter.
It will usually take a few days in order to get the money, but much less than a standard personal loan from a bank or credit union. This loan also has a much more flexible repayment schedule than personal loans since essentially the money being borrowed belongs to the person borrowing it. Another positive note is that the interest being paid goes directly back into the account, so the money ends up directly back into the pocket of the borrower at the end of the day.
The details would need to be combed over because this type of loan is much more complicated than some of these others, but it should absolutely be considered as an option for anyone in need of quick cash.
This loan should only be used in the most extreme situations. A payday loan is quite predatory in nature but it can be useful depending on the situation.
Of all these options, it will be the fastest from application to cash in hand and will have the shortest length of repayment, but the fees and interest rates are astronomically higher than any other option. In fact the average interest rate for a payday loan is 391%, but desperate times can call for desperate measures.
The way this works is the applicant will apply for the loan (often under $500), and will give up their next paycheck to pay it off, which is typically around two weeks. While one positive is that credit score is not a factor, the applicant must have a working bank account, and if the payment is not made the funds will be drafted from said account. You don’t want to get into a situation where you need to find out how to stop payday loans from automatically debiting your account.
These loans are illegal in several states and often lead to a pattern of debt so they should be avoided unless all other options have failed.
The Takeaway: Anyone that needs to borrow money fast has several options to choose. It is up to the individual to weigh the pros and cons of each in order to decide what is the best option available for them.
Borrowing money fast can lead to some long term financial troubles if done recklessly. However, if times are tough enough then even the leakiest life boat can be better than drowning in the water.
At the end of the day the details of the financial trouble that requires the loan will dictate which loan is the best one to solve the problem in the best way for the individual.
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