If you’re looking to pay for home renovations, medical bills, or other large expenses, there are several ways to borrow money. Personal loans, financial apps, and credit cards are just a few options for covering big costs and paying back the amount over several months or years.
Keep in mind, though, that borrowing money usually comes with interest charges and fees. Plus, some loans are more expensive than others, so it’s important to compare your options before you make your decision.
Here’s a closer look at ways to borrow money, as well as the pros and cons to consider.
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9 ways to borrow money
When you need to borrow money to cover an expense, there are seven common ways to do it. In the table below, read for who and when each method might be best. Click on the method to learn more details about that option.
Ask the expert: What advice do you have for readers trying to decide which of these options is right for them?
Eric Kirste, CFP
– How much is the interest rate, and is it fixed or variable?
– How long do you intend to borrow money for?
– Is the monthly payment affordable based on your needs, or do you need to adjust accordingly based on the prior factors (length of time, interest rates, etc.)?
– Finally, take the lender’s fees into consideration or if any down payments are required when determining whether the total costs of these loan options make sense for you.
| Type of loan | Best for |
| Personal loan | Large loan amounts and lengthy repayment terms |
| App | Small loan amounts that you can pay back on your next paycheck |
| 0% APR credit card | Expenses that you can pay off in full over 12 to 15 months |
| Home equity loan or HELOC | Homeowners with strong credit and available equity |
| Buy now, pay later (BNPL) | Spreading out the cost of large-ticket items over six weeks |
| Credit card cash advance | Emergency expenses if you’ve already exhausted other, more affordable options |
| Peer-to-peer loan | Large loan amounts and lower credit score requirements than personal loans |
| Life insurance loan | Borrowers with a cash value life insurance plan |
| Retirement loan | Borrowers who can pay back the loan within five years |
Personal loan
If you need to borrow $1,000 or more, a personal loan may be a good fit. You can typically borrow a personal loan anywhere from $1,000 up to $50,000 or $100,000, depending on the lender. Online lender BHG Money even funds personal loans up to $200,000 for creditworthy borrowers.
Personal loans are usually unsecured, meaning you don’t have to back them with collateral. You can find them from various lenders, including banks, credit unions, and online lenders. You can use a personal loan for almost any purpose and will likely pay it back in fixed monthly payments over a term from one to seven years.
Your interest rate largely depends on your financial profile, especially your credit score, but may range from around 8% to 36%. According to the Federal Reserve, the average rate on a two-year personal loan is 12.17%.
Some lenders offer quick funding and can disburse your personal loan the same day your application is approved. Others take a few days or a week to approve your application and distribute your funds.
Pros
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Personal loans are usually unsecured, so you don’t have to put up collateral.
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Interest rates tend to be fixed, so you have predictable monthly payments and long-term loan costs.
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You can often stretch out repayment over several years.
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You may be able to prequalify for a personal loan online, meaning you can check your rates without dinging your credit score with a hard inquiry.
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Some lenders can provide a loan the same day your application is approved.
Cons
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Rates can be as high as 36% for borrowers with bad credit.
Part of the reason rates are higher on unsecured loans is because there are no collateral obligations, so lenders will charge higher interest rates due to the risk of not having collateral to fall back on if you default on your debt.
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You may have to meet minimum credit score and income requirements to qualify.
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Some lenders charge loan fees, such as origination fees or late payment fees.
Apps that let you borrow money
If you need a smaller loan amount, consider a loan or cash advance app, such as Earnin, MoneyLion, Dave, or Brigit. These apps let you borrow anywhere from $5 up to a few hundred dollars (typically a maximum of $500 or $750).
You often must pay back the amount on your next paycheck via automatic withdrawal from your bank account. Some apps offer free loans if you don’t mind waiting one to three business days to get the cash. If you want instant funding, you’ll have to pay a fee, which may cost around $1 to $10 depending on the app and size of your loan.
Loan and cash advance apps may be a good fit if you have to cover a short-term cash flow issue and can pay back the amount on your next paycheck. However, they’re not recommended as a long-term solution for covering expenses.
Pros
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Convenient and quick access to cash via an app on your phone.
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Can help you cover an unexpected emergency expense.
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Doesn’t require a credit check.
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Lets you borrow against your next paycheck, effectively receiving your funds sooner than payday.
Cons
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You may have to pay a monthly subscription fee or extra fee for instant funding.
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Funding can take up to three business days if you don’t pay an instant funding fee.
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Could trigger overdraft fees in your bank account if you don’t have sufficient funds when your payment is due.
0% APR credit card
Paying for something with a credit card is also an option, but credit cards typically have high APRs. According to the Federal Reserve, the average credit card APR is 21.29%. However, you may be able to avoid interest for a certain period of time with a 0% APR credit card.
Credit cards with 0% APR promotions don’t charge interest on your purchases during the introductory period, which could span 12 to 15 months. If you can pay off your charges before the 0% APR period ends, you’ll essentially get an interest-free loan. Plus, some cards offer rewards on your purchases in the form of cash back or travel points.
However, carrying a balance past that time could mean hefty interest charges, and credit card debt is notoriously difficult to pay off. Consider whether you can pay off your costs in full before the regular APR kicks in, as well as avoid racking up too many additional charges.
You usually need good or excellent credit to qualify for a 0% APR credit. You can apply directly with a credit card company online and may get an instant approval decision. If your application is approved, you’ll typically receive your card in the mail in one to two weeks.
Pros
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May not have to pay interest on your charges for 12 to 15 months.
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Could earn rewards points on your credit card that you can redeem for cash back, miles, gift cards, or other options.
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You can charge up to your available credit limit.
Cons
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Regular APR may be high, and you could face expensive interest charges once the 0% APR promotional period comes to an end.
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Could be difficult to qualify for a 0% APR credit card if you don’t have good credit.
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Charging an expensive purchase to your card increases your credit utilization ratio, which could drag down your credit score.
Home equity loan or HELOC
Homeowners may also consider tapping into their home equity to borrow money. Home equity is the difference between what your home is worth and how much you owe on your mortgage. There are two main methods for doing this: a home equity loan or a home equity line of credit (HELOC).
- Home equity loans offer a lump sum of funding upfront that you pay back over time, usually at a fixed rate. Generally, a home equity loan is better for someone who knows exactly how much they need to borrow and wants to borrow the money all at once.
- A HELOC provides a line of credit that you can draw on as needed and pay back as you go. HELOCs often come with variable rates, though you may find fixed-rate options or HELOCs that let you switch from a variable to a fixed rate. A HELOC is better for someone who isn’t sure how much they need to borrow and would like flexibility.
Home equity rates vary, but current rates fall around 8% to 13%. Home equity loan repayment terms may range from five to 30 years, while HELOCs often come with draw periods of 10 years and repayment periods of up to 20 years.
You can apply for a home equity loan or HELOC online with various banks, credit unions, and online lenders. Along with providing your personal details, you’ll have to upload verifying documentation about your income and property.
Some lenders may also require a home appraisal, but they may be able to assess your home’s value with a quick online desktop appraisal.
Home equity loans and HELOCs are secured loans that use your home as collateral, meaning you risk losing your home to foreclosure if you can’t repay the loan. However, if tapping into your home equity seems like a good option for you, check out our guides to compare the best home equity loans or the best HELOCs.
Pros
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Rates may be lower than what you’ll find with other loan options.
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You can choose between a lump sum loan and a line of credit.
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You have both fixed- and variable-rate options, depending on which loan product you choose.
Cons
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Your equity functions as collateral, so you risk losing your home if you can’t repay the loan.
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You’ll have to meet a lender’s requirements for equity, credit, and income.
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It can take anywhere from two weeks to two months to get your home equity loan or HELOC.
Buy now, pay later (BNPL)
There are a variety of BNPL services, such as Affirm and Klarna, that let you spread out the expense of a major purchase over time. Retailers often partner with these BNPL providers and may offer this option at checkout.
If you pass a soft credit check, you can select to finance your purchase via BNPL, also known as a point-of-sale loan. These services often don’t charge any interest or fees if you pay off your expense in four payments, usually over a period of six weeks.
Longer repayment terms may be available but typically come with interest charges and may require a hard credit inquiry.
Pros
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Usually, it doesn’t require a hard credit inquiry if you select a short term.
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Don’t charge interest or fees if you pay back the amount quickly, usually over the span of six weeks.
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Let you purchase an item now and pay it back over time.
Cons
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Could trigger overdraft fees in your bank account if you don’t have sufficient funds when your payment is due.
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Longer repayment terms usually come with interest charges and require you to pass a credit check.
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BNPL providers may charge late fees if you don’t make your payment on time.
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BNPL may not be available at every retailer.
Credit card cash advance
If you carry a credit card in your wallet, you may be able to borrow money with a cash advance. You can often use your credit card to take out cash at an ATM, similar to how you would with your debit card.
However, cash advances can get expensive fast. They usually come with a fee of 5% of your transaction and may have higher APRs than your credit card’s regular purchase APR.
Unlike with purchases, you also usually don’t get an interest-free grace period on a cash advance. Instead, the amount you borrow starts accruing interest right away.
Because of the high fees, a credit card cash advance is usually not recommended if you can get a more affordable loan elsewhere (or if you can cover expenses from your own savings).
Pros
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If you already have a credit card, you can use it or get cash immediately—no need to apply to borrow money.
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Convenient and quick access to cash from an ATM.
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Can help you out in an emergency.
Cons
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Comes with a cash advance fee that may cost 5% of your transaction.
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Cash advance APR is typically higher than your regular purchase APR.
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Cash advances start accruing interest charges right away – there is no grace period.
Peer-to-peer (P2P) loan
Peer-to-peer loans are another option for borrowing money online. Rather than taking out a loan from a bank, you’ll borrow from an individual investor via a P2P lending site like Prosper.
P2P loans may have somewhat less stringent credit score requirements than personal loans, but they may come with higher interest rates and more fees. Interest rates typically won’t exceed 36%.
Pros
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May have more flexible credit score requirements than personal loans.
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Can often borrow up to $50,000 or more.
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You can apply for a P2P loan online.
Cons
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May come with higher interest rates and more fees than a personal loan.
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Funding time could take longer since you have to be connected with an individual investor.
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Some large P2P platforms don’t provide loans in every state.
Borrow money from your life insurance
If you have a permanent life insurance policy, such as whole life or universal life insurance, you may be able to borrow money from it. Note that you can’t borrow money from term life insurance, as it has no cash value.
There’s no credit requirement to borrow from life insurance since you’re essentially taking out money from yourself. You’ll still need to pay back the borrowed amount with interest, though. Failing to pay back the loan could mean your policy lapses, as well as incur greater interest charges and potentially have tax implications.
If the money is not repaid in full, your beneficiaries could receive less from the life insurance policy. Since borrowing from life insurance is fairly complicated, it may be worth speaking with a financial advisor before pursuing this option.
Pros
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May come with low interest rates and flexible repayment terms.
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No credit check is required.
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You usually don’t have to pay taxes on the amount you borrow if you pay it back on time.
Cons
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Missing payments could lead to increased interest charges and a potential tax bill.
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The amount you owe, plus interest charges, could be subtracted from the amount your beneficiaries receive.
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Not all life insurance plans allow you to borrow money.
Retirement loan
If you have a retirement plan through an employer, like a 401(k), 403(b), or 457(b), your plan sponsor might offer the opportunity to take out a loan against part of your vested balance.
While borrowing from yourself may seem like an easy option, there are certain repayment penalties that should make this one of your last resorts for a loan. Plus, withdrawing from your retirement account could leave you with less money when you’re ready to stop working.
You’ll miss out on time in the market when your savings could have been earning interest.
Pros
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No impact on your credit—payments won’t appear on your credit report.
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You pay interest on the loan to yourself, making it a potentially low-cost way to access cash.
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No credit check is required, and there’s usually a short application.
Cons
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If you don’t repay your loan within the required time frame (usually five years), it will be treated as an early distribution, and you’ll have to pay a 10% penalty fee.
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If you leave your employer before you repay the loan, you may have to pay the full outstanding balance immediately.
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You could endanger your future savings, making it difficult to retire later in life.
Need to borrow money for a specific situation? Check out these additional resources:
What to keep in mind if you need to borrow money instantly
When considering borrowing money instantly through an app or through a loan, there are some key details that are important to look out for and understand.
Interest rates
Interest is the cost of borrowing money, and your rate determines how costly your loan will be. A high interest rate will mean higher borrowing costs, while a low interest rate means a more affordable loan.
Rates can vary by loan type and lender, but they also largely depend on your credit score. If you can take steps to improve your credit score before you apply, you may qualify for a better interest rate on a loan.
Some lenders also let you apply with a creditworthy cosigner or co-borrower, which can help you access better rates.
Repayment terms
Your repayment terms refer to how long you must repay the loan and how often you’ll make monthly payments. Personal loans, for instance, often come with terms between one and seven years, whereas paycheck advance apps typically want you to pay back your loan on your next paycheck.
Pay attention to the loan repayment terms, and make sure you have a plan to pay back the money before you borrow.
Fees
Some loans come with fees on top of the interest that you pay. Common loan fees include origination fees, application fees, prepayment fees, and late payment fees. Make sure to review all the fees associated with your loan so you understand the true cost of the money that you’re borrowing.
Funding time
How quickly you need to borrow money could impact which financing option you choose. Some apps offer instant cash for a fee, whereas other lenders take a few days or weeks to process your application and disburse your loan. Keep in mind that fast funding often comes at a higher cost.
Secured vs. unsecured loans
It’s also important to consider whether a secured or unsecured loan makes sense for you. Secured loans may come with better interest rates and higher loan amounts, but you’ll need to back them with collateral, and you risk losing your assets if you can’t repay the loan.
With an unsecured loan, you don’t have to pledge any personal assets, but you’ll generally need strong credit to qualify and to get a decent interest rate.
Customer service
Another factor worth considering is the customer support that a lender offers. Some lenders offer support via email, web chat, or phone, while banks with physical locations can offer in-person customer service. Consider whether the lender has options to support you through the borrowing process.
Loan use
Any time you borrow money, it’s a good idea to consider why you need it. Are you spending it on something that you truly need, or can you live without it?
If it’s not a true need, consider holding off on the loan. Borrowing money can be expensive, and you may be better off saving up until you can afford the expense without taking on debt.
Ask the expert: What are some good uses of borrowed money vs. not good uses?
Eric Kirste, CFP
1) Consolidating debt is a common and good use of borrowed money if it helps cut costs and reduce monthly payments. By combining debt, it makes it easier to make a single payment and better understanding of a time frame to pay off the debt.
2) A home equity loan or HELOC is an excellent option to make upgrades to your home or to complete necessary repairs that exceed your savings/emergency plan. However, whether you use a personal loan for these purposes may depend on the speed and urgency of the required funds.
3) Emergency or large purchases—if you need a major automobile repair or must replace a household appliance, for example, it can be a good use of borrowed funds.
Not good uses:
1) You are not able to afford the monthly payments. It will be important to understand your budget and incorporate a spending plan to pay down the new debt.
2) If your credit score is too low, which may make some/all of these options too expensive. Instead, take some time to repair your credit score and revisit this need if you are able to at a later date.
FAQ
Where can I borrow money fast?
You have several options for borrowing money fast, including a loan app, personal loan, and credit card cash advance.
There are several loan apps that offer instant small-amount loans (for instance, $500 or less), but you’ll need to pay a fee between $1 and $10 for express funding. Some personal loan lenders also offer fast loans, often disbursing your loan the same day you’re approved.
A credit card cash advance is also an option for borrowing money fast, but proceed with caution—cash advances typically come with high fees and substantial interest charges.
What are the basic requirements to borrow money online?
The requirements to borrow money online will vary depending on the lender and type of loan. Loan apps, for instance, generally require that you have a verifiable bank account and can pay your loan back on your next paycheck.
An online personal loan, on the other hand, usually requires a good credit score, a steady income, and an acceptable debt-to-income ratio. To borrow a personal loan, you may need to provide your personal details and verifying documentation, such as pay stubs, tax returns, or bank statements.
“A person’s credit score is calculated based on five areas: length of credit history, amounts owed, payment history, new credit, and mix of credit,” says Kirste. “Your credit score will be temporarily impacted when you take out a personal loan because you add new debt, which may affect your ability to qualify for additional debt or credit in the short term.
“It’s important to understand the need for the funds and if you should take out extra money for a potential future need,” Kirste continues. “While you may see a temporary dip in your credit score at first with a new loan or credit, it can go back up and improve over time with a good payment history.”
Is my data secure if I borrow money via an app or online?
Online and mobile banking is safe if you borrow from a legitimate lender that uses encryption and other cybersecurity practices to keep your data private and secure.
There are also steps you can take to keep your data secure, such as downloading the verified app, using a strong password, and not checking your accounts on public Wi-Fi.
Is there a difference in interest rates for online loans versus traditional loans?
You may be able to find more competitive interest rates (and faster funding) on online loans than traditional loans. Since online lenders don’t have to pay for brick-and-mortar locations, they can often funnel those savings into low rates and favorable terms for borrowers.
However, it’s generally a good idea to shop around with different types of lenders to see where you can get the best rate. It’s worth checking with your current bank, too, since some banks offer loyalty rate discounts for existing customers.
What are red flags to watch for if you need to borrow money instantly?
There are predatory lenders out there that target vulnerable borrowers who need to borrow money instantly. One red flag to watch out for is a lender that offers instant loans without a credit check.
These loans may be payday loans that can come with exorbitant APRs of 400% or higher. You should also be wary of lenders that try to rush you through the application process, don’t clearly disclose their rates and terms, or make promises that sound too good to be true.