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Sources for Borrowing Money
When you are in a money pinch, there are many causes of capital available. They all have various interest rates, fees, and terms. When you need to borrow money, consider each one of these items carefully.
Loans from banks
The most efficient, lowest-cost type of loan is usually to borrow money from the bank. It takes good credit and a good relationship with your bank. Based on your purpose in borrowing money, you may want to set up collateral for the bank. You’re going to get the cheapest rates of interest with secured loans. These are loans against a good thing, such as a house or a car. They carry lower risk to the bank so that they are available with lower interest rates. Unsecured loans and credit lines carry higher interest rates.
Credit Cards
Charge cards really are a very easy but very costly way to take a loan. Should you only need cash for a few weeks, the price can be reasonable. But if you’ll need cash to have an extended period of time, you will find usually cheaper methods to borrow money. Also be sure you understand your payment cycle, interest rates, and payment information before using this method.
Loans from Members of the family
Obtaining a loan from a family member or friend can be very flexible. You can set the terms with the lender. However, borrowing from members of the family and friends can stress your relationship. Make sure you set everything out in writing, including the interest rate, payment schedule, and penalties for late payment.
Peer Lending
If you need a loan for a small business venture, you can take a loan online through peer lending. Peer lending websites connect borrowers and investors who are able to connect with fund a business idea, repay debt, or finance another type of purpose.
401k Loans
If you have money saved in a 401k plan with your employer, you can usually borrow as much as 50% of the worth of your bank account. You have to pay interest on the loan, but the interest goes back to your account. Remember that you have an opportunity cost with this particular option. The cash you borrow can’t grow as an investment before you repay the loan. Be also aware that you will have to repay the borrowed funds entirely shortly after you depart the company. Consult your tax professional to know the tax ramifications this could cause in retirement. Your interest is usually considered pre-tax money and will be taxed upon retirement, even though you paid it with after-tax dollars.
