4 alternatives to getting a personal loan | News, sports, work
Personal loans provide quick, unsecured funds that can pay for everything from home repairs to medical emergencies. Rather than requiring a home or car collateral, many lenders prefer applicants with large loans and high incomes.
But what if you don’t meet the lender’s requirements? People who do not qualify for a personal loan have an alternative to high-interest predatory lenders. These options can help you cover the income gap, but each has its own advantages and disadvantages.
Try options without borrowing
See if you can come up with the money by making room in the budget and pulling in some extra cash, says Tania Brown, a certified financial planner and financial trainer based in the Atlanta area. Check your budget for expenses you can cut back, even temporarily, such as dinners out in the city or streaming services.
To save on your existing bills, ask billing companies, creditors or doctors’ offices if they offer interest-free payment plans, he says.
Finally, a few reduced expenses with extra income from an extra performance, such as booking rides or selling things you don’t need anymore, says Brown.
Borrow from your family
If you don’t mind asking a family member for money, this may be one of the cheapest borrowing options. It does not require credit checks or credit reporting, but may require additional planning.
Bring “game plan” This includes the loan amount, the interest rate, and the repayment period as you bring it up to take the guesswork out of your decision, Brown says. For a small loan, an informal loan document between you and the lender is sufficient. Larger loans may require a formal contract.
Ideally, a lawyer will draw up a formal loan document that you both will sign, says Philip Mock, CFP, based in Tulsa, Oklahoma. You may have to pay an attorney’s time fee.
Family loans can have tax implications, says Mock, so do your research when drawing up the loan agreement. For larger loans or more complex questions, please consult your tax advisor.
Split a large purchase
AND “Buy now, pay later” A payment plan can ease the stress of a large purchase by breaking it down into multiple smaller payments. BNPL plans are available at most major retailers and can, for example, ease the financial blow of a new mattress or computer.
BNPL is an easy and quick solution as there is no hard credit check or lengthy application process, says Kristian Brennon, an accredited financial advisor based in Kansas City, Missouri.
As BNPL providers automatically pay out installment payments directly from your account, they recommend that you set up reminders about the due date and make sure that your account is not exceeded.
Get a cash loan
Cash draw apps like Earnin and Dave give you a quick inflow of several hundred dollars with no credit checks and lower fees than payday loans. But just like payday lenders, these apps require access to the user’s bank account to pay off the next payday payout.
While they’re convenient, apps should be used sparingly as their budget can be tough, Brown says. The amount you borrow today will leave this size hole in your next payout, so I recommend that you anticipate this gap before borrowing.
“Make sure you get exactly the amount you need and that you have a plan on how you intend to pay it back.” she says.
Build savings over time
Savings is an interest-free way to pay for emergencies and discretionary expenses. Mock recommends saving three to six months of expenses, but having up to several hundred dollars in savings will help cover most unexpected expenses.
List your future expenses – such as Halloween costumes and Christmas presents – and budget for them in advance, Brown says. This way, your savings can be set aside for unexpected expenses or income gaps.
“Life will always have ups and downs and learning to manage is the key” she says. “It helps to turn what would be a crisis into an annoying inconvenience.”