Short on cash? There are many different avenues for borrowing money. Some methods can have an immediate benefit up front with easy qualification standards, but usually higher interest rates are involved. Other methods offer more flexibility and convenience but can be harder to qualify. Here are five different methods to borrow money when needed.
Credit Card Lending
Credit card lending can be one of these easiest and quickest methods of borrowing money. There is a difference between purchasing goods and services and receiving a cash advance. The main disadvantage to this method is that cash advances have significantly higher interest rates. Be sure to look at the terms of agreement to understand the differences in interest rate charges.
Bank lending encompass many different types of products. Some of these loan products include home loans, car and boat loans, home equity loans and a traditional signature loan. A signature loan is considered to be a personal loan from a banking institution that does not require collateral. Usually the money borrowed is used for home repairs, consolidating debt or for a family vacation. There is interest involved and a fixed number of payments will need to be made to the banking institution for a set period of time. The interest rate and payment schedule depends on your credit worthiness (determined by your credit report and score) and collateral, if any is used to guarantee the loan.
Peer-to-peer lending is the oldest and most traditional method of borrowing. This type of borrowing includes getting a temporary, personal loan from a family member or friend. One advantage to borrowing this way is that there may not be any interest charges involved. The downside is that if expectations are not maintained for repayment, then serious strain on relationships may occur. Another type of peer-to-peer borrowing is known as social borrowing. These loans are performed on the Internet and come from people who are not necessarily family members or friends. One example of this type of lending is Prosper Marketplace (see Resources).
Payday loans are short-term loans that are available in case of emergency. These types of loans go by many different names--check advance, post-dated check, cash advance or deferred deposit check loans. In most cases, these loans are for short period of time, usually two to four weeks. You need to provide photo identification and proof of income in the form of previous pay stubs. Typically, in exchange for the amount borrowed, the lending institution will ask for a post-dated check plus a fee. Payday loans have very high interest rates associated with them, so be sure to read the terms of agreement.
Margin Lending is related to a personal portfolio of stocks and mutual funds. Basically, the brokerage firm uses the mutual funds and stocks as collateral. One great aspect of this method is that the interest is normally much lower than credit card interest. However, there is an inherent risk. If the overall value of the stock portfolio goes down, then the only option might be to sell the stock or mutual fund that's been placed on margin.