Last month, I wrote about why a cash loan can be a bad idea, but what if you’ve got an emergency cash need. This week, I’m talking about six alternatives to bank loans you may want to consider if you’re looking for additional cash in a hurry!
Six Alternatives to High-Interest Bank Loans
If you own a home with some decent equity, you may qualify for a Home Equity Line of Credit (HELOC). The benefit of a HELOC is that you’re borrowing against your own assets. Generally, a HELOC comes with lower interest rates than bank loans or payday loans.
Additionally, there may be some tax advantages depending on the purpose which you’re using the funds for. If you opt for a HELOC, be sure to check with your CPA or financial advisor in advance.
2. 401k Loan
Similar to the concept of a HELOC, you may find borrowing against your 401k preferable to taking out a cash loan. With a 401k loan, you’re paying yourself back, rather than the bank.
There are large penalties if you’re not careful with your repayments. Leaving your employer, or failing to pay the loan in full within a specified period of time could be costly.
3. Obtain an advance from your employer
Consider visiting Human Resources. Your employer may have a program to allow you to borrow from your future self. While similar to a payday loan where you are advanced an amount from a future payday, there is typically no fee or interest associated when working with your employer.
Besides, your company will likely limit you to a single advance, and the amount will be withheld from a future paycheck, thus preventing you from non-payment.
4. A Payment Plan
If Fido needs emergency surgery, or your car won’t make it another day, ask for a payment plan. Many businesses will offer this option if asked for. Walmart will allow a layaway plan during certain times of the year and most other retailers offer some sort of pay-over-time option.
Creditors also tend to be flexible if you’re proactive. Give them a call in advance of a late payment, explain your story and you’ll likely find yourself an extension.
5. Help from Family
Many people frown against borrowing money from friends or family. This is wise guidance because many friendships have ended over something as trivial as a couple of hundred dollars.
Tread carefully, be sure to lay out the ground rules in advance, and pay them back as quick as possible. Consider paying them a small amount of interest. Perhaps half of the interest rate you would pay with a bank loan.
6. Sell Something
You likely have a garage, a closet, or an entire room full of items you no longer want or need. Go through your unwanted items and sell them on Facebook marketplace or Craigslist for some quick cash. An added benefit is a decluttered home.
If you’ve got time, consider eBay, or Amazon FBA as selling platforms. You could also go extreme and sell something such as your expensive car, and replace it with a more economic and cheaper alternative.
The average annual percentage rate on a personal loan will range from 10% to 28% in 2019, according to Value Penguin. Choose one of the above options to keep more of your money in your own pocket.
Have you considered any of the above options to borrowing from the bank? Let us know in the comments below.