A Guide to Accessing Funds When You Need Them

Borrowing money can pave the path to graduation, fund your business ambitions, or float you through tough times. Today, it’s easy to access funds from a variety of sources to finance almost any need. 

The trick? Selecting a lender and loan that suits your situation.

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Traditional banks

When you think of borrowing money, banks probably spring to mind first. 

Banks fund a variety of loans designed for common needs like buying a home, personal use, or business use. Most also refinance existing loans into new debts with better rates or more flexibility. But be warned: many don’t cater to credit scores below 670 or so. 

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Funding options

• Auto loans 
• Mortgages
• Home equity lines of credit
• Personal lines of credit
• Personal loans
• Private student loans
• Business loans

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Pros

• Easy to access
• Existing customers may receive APR discounts
• Brick-and-mortar customer service experience available

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Cons

• Often have higher application and servicing fees
• May sell loans to other financial firms
• Many don’t serve poor credit borrowers

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Credit unions

Credit unions are generally non-profit financial institutions – similar to banks – that impose membership requirements. Since most have lower overhead, they’re known for lower-rate, lower-fee funding and offer some of the best APRs for personal loans. They may also accept credit scores that traditional banks would turn away. 

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Funding options

• Auto loans
• Mortgages 
• Home equity lines of credit
• Personal lines of credit 
• Personal loans
• Credit builder loans
• Private student loans
• Business loans

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Pros

• Lower fees and APRs
• Existing customers may receive APR discounts
• Better approval odds

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Cons

• May have fewer loan options
• May have membership requirements
• Typically regional 

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Online-only lenders

“Online lender” is a broad term that refers to internet-based financiers like Rocket Mortgage, Ally Bank, and “financial tech” lender Avant. They boast fast applications, quick funding, and the convenience of applying in your underwear. 

Exact terms and costs vary by lender and loan purpose, but their lower overhead may translate to bigger savings. However, you’ll want to avoid predatory and “bad credit” lenders that jack up their rates. 

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Funding options

• Mortgages
• Auto loans
• Personal loans
• Private student loans
• Credit builder loans
• Business loans

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Pros

• Fast application and funding
• Bad credit borrowers may qualify
• Potentially lower-cost 

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Cons

• No in-person customer service
• Predatory lenders may charge higher rates
• Less room for negotiation

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Public agencies

Various U.S. government or government-sponsored agencies fund accessible business and personal loans. Think Fannie Mae, the FHA, and the VA for affordable mortgages, or the SBA for business loans.  

Often, government loans set looser credit requirements, extended terms, and more favorable APRs. However, you may do more paperwork, and many loans restrict money borrowing by income or assets.  

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Funding options

• Housing assistance
• Home renovations/upgrades
• Student loans
• Business loans

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Pros

• Better rates than private lenders
• Wide variety available
• Poor credit borrowers may qualify

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Cons

• May have to meet income/asset requirements
• Longer applications
• Often impose eligibility criteria (veteran or low-income status, etc.)

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Credit cards

Credit card issuers extend revolving credit lines you can re-borrow from repeatedly. You can access funds in two ways: 

1. Using your card charges your regular APR, but you may avoid interest by paying off your balance monthly. Some cards offer 0% intro APR periods, which makes money borrowing free if you repay your balance. 
2. Cash advances provide instant cash, but your sky-high interest rate starts accruing immediately. Most lenders also limit cash advances to a percentage of your credit line.  

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Funding options

• Revolving credit line
• Cash advances

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Pros

• No application fees
• Paying in full negates interest charges
• Good borrowing habits build your credit score

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Cons

• Higher interest rates
• 0% intro APR benefits expire
• High balances hurt your credit score 

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Cash advance apps

Many financial services – Cleo included – offer affordable cash advances. These are smaller spots, usually $50 to $500, that you repay from your upcoming paycheck. Many waive interest charges entirely, though you may pay a subscription fee to access funds. 

At Cleo, you could get a spot of up to $250 with no interest, no credit checks, and no minimum direct deposit required. Plus, our money app roasts you into building a better budget, so needing money may be less common in your future. 

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Funding options

• Cash advance loans

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Pros

• Quick and easy funding
• No or low interest
• Small, affordable amounts

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Cons

• Some subscriptions amount to high APRs
• Amounts typically limited to $500 or less
• Typically must be repaid from your next paycheck   

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Buy now, pay later (BNPL) services

Buy now, pay later services fund (typically online) purchases at checkout. You usually put around 25% of the cost down, then repay the rest in installments over 1-6 months. Most BNPL loans don’t charge interest or fees, though those that do may set high rates. 

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Funding options

• No-interest loans
• Item- or purchase-specific loans

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Pros

• May not charge interest or fees
• Short-term funding
• May waive credit checks 

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Cons

• Easy to overspend
• Some charge high APRs
• No long-term loans
• Retailers choose BNPL partners

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Peer-to-peer (P2P) lenders

Peer-to-peer lending is a newer money borrowing model where individuals borrow from other individuals. Borrowers can use P2P platforms to apply for almost any kind of financing. Then, individual investors can fund loan requests at an agreed-upon rate. The downside: borrowers may receive only partial funding or owe money to multiple people.  

Funding options

• Mortgage-related loans
• Personal loans
• Private student loans
• Business loans
• Investment loans

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Pros

• Accessible to poor credit borrowers
• May receive lower interest rates
• More lending options

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Cons

• No in-person customer service
• Not available everywhere
• Fees and interest rates may vary
• May owe money to multiple lenders

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Finance companies

Finance companies fund short-term loans for specific purchases and businesses, like Toyota, Ashley Furniture, or Samsung. Many offer competitive rates and no application fees, but credit and income checks are required. Additionally, finance companies are licensed and regulated at the state level and aren’t subject to federal oversight. 

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Funding options

• Item-specific personal loans
• Auto loans
• Business loans

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Pros

• Fast application
• Same-day funding
• Competitive rates and fees
• Traditional and non-traditional lending networks

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Cons

• Less regulated
• May charge predatory rates to poor credit borrowers
• Loans are secured against the financed item
• Inflexible terms 

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401(k) loans

Some retirement accounts, like 401(k)s and 457s, allow employees to take tax-free loans against their retirement. The IRS limits these loans to 50% of your retirement (up to $50,000), and requires repayment within five years. 

Borrowing money this way means that any “interest” pays into your own account. However, the IRS may reclassify your loan as a distribution and charge taxes and penalties if you don’t repay on time.  

Funding options

• Personal loans 

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Pros

• No fees
• Pay interest to yourself
• No credit impact

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Cons

• IRS imposes borrowing limitations
• Non-payment can incur taxes and penalties
• Loss of tax-advantaged growth for retirement
• Leaving your job may trigger immediate repayment

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Margin account loans

Investors may be able to tap their margin accounts for quick loans. While these loans are designed to purchase investments, some brokerages permit personal loans, too. Many boast low interest rates, though your loan amount is limited by your assets. And if the market drops, you may have to deposit more collateral or sell your investments. 

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Funding options

• Investment loans
• Short-term personal loans 

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Pros

• Borrow against your equity
• Low interest rates
• No additional fees
• Can pay in cash or by selling securities

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Cons

• Market fluctuations impact repayment requirements
• May have to sell assets prematurely
• Interest rates may fluctuate 

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Pawnshop loans

Pawnshops fund secured loans against items like instruments, antiques, jewelry, and electronics. This method of money borrowing is quick if you have valuables lying around the house. However, if you don’t repay your loan by the deadline (usually a month), you’ll have “sold” your property for less than its full value. 

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Funding options

• Secured short-term loans

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Pros

• Access to fast cash
• No approval process
• Doesn’t hurt your credit score

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Cons

• Fees and interest add up
• May charge extra for appraisal, storage, and insurance
• Short-term loans only
• May “sell” item for a fraction of its value

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Family and friends loans

Sometimes, you just need a little help from your “village” to get by. 

Family and friend loans cut out the formalities of a traditional loan and can be great if you have poor or no credit. However, you risk ruining your close relationships if you can’t or don’t repay your loan. 

If you go this route, be sure to put your agreement on paper to make it official.

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Funding options

• Personal loans

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Pros

• No formal application/approval process
• No harm to credit
• Can negotiate repayment and interest informally

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Cons

• Can ruin close relationships
• Not using a contract can lead to repayment arguments

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Borrowing money can get you through a tight spot

Borrowing money isn’t always ideal, but it’s possible to leverage loans into bettering your future and financial standing. No matter which way you decide to access your funds, be sure to shop around for the best rates and terms possible. And don’t forget to make your payments on time and in full so you can build your credit score.

Want a little help making the whole money thing less scary? Download Cleo for free to access your personalized budget.

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