Nobody wants to go into debt but sometimes you may need to find some short term financing to help you get through temporary hiccups in your financial life. When situations like this arise it is important to know the places that you can turn to for financial help. Payday lenders and pawn shops are the last places that you ever want to go for short term financing. Here are a few of the best alternatives when borrowing money.
Credit Unions
Credit unions should always be your number one source for financing loans. They offer simple low cost solutions that are often the best financial deal available. The majority of people know that credit unions offer home loans and auto loans but are unaware of their other loan products. Credit unions offer unsecured products that their customers can use in a crunch. Two of these loan products are personal loans and signature loans.
Credit unions offer even lower interest rates on loans to individuals with assets to back their financing requests. Secured loans rely on assets as the collateral for the loans. These loans can even be backed by deposits in your account. The monthly payments are drastically lower than those of payday lenders and pawnshops. You could also place community banks in this category.
Lending Exchanges
Lending exchanges are often advertised as the place where lenders compete for your business. That is true. You can get a lot of offers to borrow money in just a few hours using sites like LendingTree and E-Loan. They are solid alternatives for borrowers that need a loan fast and have a quality credit score. The advantages of sites like these are that you can get quick access to capital at a relatively low cost.
The only drawback to using a lending exchange is that there are several high requirements that borrowers must meet. You need a high credit score to qualify for a loan. The minimum score is typically above 660. You also need a low debt to income ratio. If you are carrying too much debt then you won’t qualify for any loans.
Peer to Peer Loans
Websites like Lending Club and Prosper are good places to go and get loans from your fellow man. These peer to peer lending websites offer the ability to borrow money at reasonably low rates depending upon your credit rating. Investors are given the opportunity to bid on the financing of your loan. You can borrow money for any purpose, but you are dependent on the investors to fund your loan. The loans can be used for paying a few bills to realizing your goal of becoming debt free.
While it may not sound logical that borrowing money can help you become debt free, it does work in certain situations. If you have a loan at 10% interest and can borrow money at a 6% rate you can save yourself 4% in interest payments. The money that you are saving on interest payments can be used to pay down your debt.
These are just a few of the best places to turn to for short term financing. Do you know of any other places that you would recommend to borrowers looking for a loan?
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Mark Riddix is the founder and president of New Horizons Financial Management, an independent investment advisory firm that provides personalized investing and asset management consulting. Mark is a regular contributor to Seeking Alpha and has written financial columns for Baltimore and Washington, D.C. area newspapers.
The last time I bought a car with a loan (hopefully the last time ever, but I digress) I shopped it around and the dealer couldn’t match the credit union so I ended up going with them. I was worried that it might be more complicated, but outside of a couple of extra phone calls and faxes, it was a cinch and we still drove the car off the lot just as we would have if the dealer had provided the loan, and with a much lower rate to boot.
This can also work if you have a working business. But it doesn’t have a guarantee that you will be able to apply for loans easily. There are certain requirements in order to qualify for loans. For example, if you are trying to apply for a business loan or cash advance, certain requirements such as FICO score of 500 – 720, in business for 1-2 yrs and etc..
The other possibility is family loans. Sometimes a loan from your parents or extended family will get you over a short term setback, and I hope they wouldn’t charge you interest.
Pat
My favorite is a credit union! I have been a member for 38 years. My kids would say Daddy bank, best rates and terms! Only kidding, they have not used me for a very long time.
Cash advances on credit cards are also an option. Also, keep in mind which bills you *can* pay with a credit card. Use your cash reserves for your rent/mortgage, and your credit card for utility bills. I also keep a running list of personal items i can sell fast in a pinch. Ie: my SLR, pistol, mountain bike. Also, have an inventory of bills you can cut fast or trim down. I don’t need a gym membership or 20mbps internet.