February 22, 2024
Written by Timothy Moore
Certified Financial Education Instructor®
Certified Financial Education Instructor®
Timothy Moore, CFEI®, is a personal finance writer and editor. Find his work on Forbes, USA Today, The Penny Hoarder, Business Insider, TIME Magazine, SoFi, and more.
Whether you've swiped a credit card, taken out a student loan, or gotten financing to buy a used car, you've likely borrowed money before. But when you need cash, especially in an emergency, you can get overwhelmed by all the options there are to borrow.
Below, we'll walk through how to borrow money using seven different options. Some require excellent credit, some are available to borrowers with bad credit, and some options don't require any credit history.
Wondering how to borrow money from the bank? Banks are a great place to start when you need cash, as they may have multiple options to choose from.
For instance, many banks have their own credit cards for which you may qualify, depending on your credit score. Banks are also a great place to take out a personal loan, and many offer auto loans and mortgages.
You can often choose from several types of bank loans. Personal loans, including those from banks, have become more popular in recent years.1
You may qualify for a lower interest rate if you're already a member of a specific bank, and some banks may not charge loan origination fees.
You can more easily repay your loan if you have a connected checking account at the same bank.
Not every bank offers personal loans, credit cards, auto loans, and mortgages.
If you aren't a member of that bank, you might not qualify for special discounts – or you might be tempted to open a checking or savings account that's otherwise not well suited to your needs just to get better loan terms.
Banks may have high credit score requirements for borrowing money.
Credit unions are one of the best ways to borrow money. If you're a credit union member, you might enjoy lower interest rates and fees than you would at a traditional bank.
Though each credit union's offerings will vary, you can usually find loans comparable to those you'd get at a bank – from credit cards and personal loans to auto loans and mortgages.
Credit unions may offer members more competitive rates and fee structures.
As with a bank, you can connect your checking account to the loan account for simple repayments.
Credit unions are usually community institutions, which means you can often count on friendly, in-person help when you need to borrow money.
Credit unions usually have membership requirements. You won't be eligible to borrow if you don't have an "in" to join.
Credit unions might require good or excellent credit requirements for personal loans, credit cards, and other borrowing products.
Not every credit union may offer the loan products you need.
Because not every bank or credit union offers personal loans – and because those that do often have strict credit requirements – there are many online lenders that make it easier for borrowers of all financial backgrounds to take out personal loans to cover emergency medical costs, fund home renovations, pay for car repairs, and more.
Not sure how to borrow money online? Typically, lenders only need basic personal information, like your name, address, and Social Security number, to get started.
Online lenders often have easy and fast processes for getting pre-qualified, approved, and funded. Some lenders offer same-day funding.
Many online lenders offer personal loans to borrowers with bad credit.
If you prefer in-person support, you may not get the customer service you're used to when you borrow online.
Interest rates and fees can be higher with online lenders that extend credit to borrowers with poor credit.
Instead of resorting to payday loans, people who need to borrow money might consider cash advances from their credit cards. This lets you withdraw cash from your available credit limit on your card.
You don't need to apply for a loan and wait for approval. This means you can get money faster.
You don't even have to go to your financial institution; just find a nearby ATM.
You don't need to put up collateral, as you would with secured loans.
Cash advances usually come with high fees and high interest rates.
There isn't a grace period, so interest begins accumulating immediately.
Cash advances can negatively impact your credit since they simultaneously increase your credit card balance and credit utilization.
Buy-now, pay-later (BNPL) apps are growing increasingly popular as they allow consumers to split payments for purchases over a set amount of time, often without fees or interest. Simply download a BNPL app to get started, or see if the specific merchant you're buying from has their own BNPL program.
You often don't have to pay interest or fees.
You usually don't need a great credit history to qualify.
You can request buy-now, pay-later at checkout – there's no paperwork or application to worry about.
BNPL programs are now widely accepted, likely at your favorite stores and online retailers.
You often still have to make one payment (usually 25%) up front.
BNPL programs might motivate you to spend money on items or services you really can't afford.
You could be subject to late fees if you fall behind.
BNPL apps typically don't report on-time payments to credit bureaus, so there's rarely potential to boost your credit score like there is with credit cards and personal loans.
If you've been lucky enough to start saving for retirement – but you're now in need of cash for an unexpected expense – you might be able to borrow against those savings. Rather than withdraw some of your 401(k) investments, which can result in taxes and fees, you can simply take out a loan against what you've already accrued.
You can typically get the lowest rates (just slightly over the prime rate) on 401(k) loans.2
Taking a loan out on your 401(k), rather than a withdrawal, avoids penalties and taxes.
Missed payments won't affect your credit score.3
The interest you pay goes back into your account.
Every cent you borrow from your future self now affects your retirement. With less money in your investments, your retirement fund will grow more slowly.
If you leave your job (whether voluntarily or involuntarily) before repaying the loan, you might have to pay the remainder in full ahead of the next tax season to avoid penalties.
Borrowing from friends and family can be uncomfortable and potentially ruin relationships, but if you fall on hard times, your loved ones may be willing to help out.
Depending on the arrangement, you won't pay any origination, late, or interest fees. Even if your family member does charge interest, it's likely to be a lower rate than you'd get elsewhere.
You don't need to meet a certain credit threshold to borrow cash from family and friends.
Owing money to friends and family can put a strain on relationships. If you're unable to repay the loan, consider how it will affect your relationship with your loved one.
Making on-time payments to a family member or friend does nothing to improve your credit score.
Credit cards, personal loans, BNPL programs, and even loans from family – these are all potential ways to borrow money. Just make sure you have a plan to meet the repayment terms specified in any loan contract so you can avoid missed or late payment fees. Whenever possible, prioritize borrowing options that will help you improve your credit score through responsible repayments.
Looking for ways to avoid taking on debt when unexpected expenses come up? Find out how to start building your emergency fund.
Borrowing money through payday loans should be considered a last resort, as they have very high interest rates and can make it easy to fall into a pattern of debt. Try to avoid using high-interest credit cards that you can't pay off unless it's to cover an emergency expense and you don't have other, lower-interest options.
Some of the easiest ways to borrow money are simply to take out a loan or open a credit card at your current bank or credit union. If you don't like the options at your financial institution, you can also easily compare personal loans from online lenders, apply and get funded quickly over the internet.
Common types of borrowing include:
Loans and credit cards from banks, credit unions, and online lenders
Cash advances and payday loans
BNPL apps
401(k) loans
Loans from family and friends
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