If you want to pad your budget with some extra cash, but are short on funds, you can borrow money to cover your shortfall. The four smart sources of winter cash include loans from family, banks, credit cards, and personal loans.
Free and Low-Interest Loans
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The word “borrow” implies a loan and interest repayment, but that is not always true. For instance, you can borrow money from family or friends, and usually not pay interest. Bank loans are another option, and they usually have low-interest rates. Another source of free money is credit cards that offer interest-free introductory periods, but when you need money fast, a personal loan could be the answer.
So the first choice when you need a loan should always be those options that are free of interest, or that cost the least. If you have exhausted all the free loan options and still need a cash infusion, consider a payday loan or personal loan.
Short-term Loans
Short-term loans include payday loans, personal loans, and even installment loans. Some personal loans go as high as $25,000. Others need collateral, such as a post-dated check, and some need nothing more than the promise to repay them. If you need money quickly, try companies such as Avant.com or Prosper.com. These lenders offer a variety of personal loan types and the ease of using an online application.
The advantage that personal loans have over credit cards and bank loans is that they fund very quickly. You can have money in as little as 24 hours. With a credit card company, it can take a month or longer to receive approval and a card. With a bank, a loan may take a week or longer.
Loans from Family vs. Bank Loans vs. Credit Cards vs. Personal Loans
Loans from family are a good option because they are free, fast, and often forgiving. The problem with family loans is that they can cause hardships and other family drama. Make sure to repay them quickly so that avenue of credit is available if you need it again.
Bank Loans are perhaps the very best option because they help you build credit and do not involve your family. These loans however, are not free, but the interest rates are usually low.
Credit card “loans” are sometimes interest-free, but you must pay them off quickly. The problems with these loan types is that they take a while to process so in an emergency this loan type is not a very good option. Also, they are risky because they can easily become a burden long-term.
Short-term loans, even though they have a high-interest rate, can actually cost less than credit card balances that convert to long-term debt. When looking for money, do the math and consider the interest, too.
When life happens — the car requires an emergency repair, the water heater breaks — try for the loan that costs the least amount of money. Free is best, but other alternatives might also be good for your budget.
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