Borrowing Wisely

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Short of cash? Shopping for a loan? You can borrow money from plenty of places—but borrowing wisely means figuring out the best alternative for your situation.

Here are things to consider about five common sources of cash.

Credit Unions. Credit unions are designed to benefit “members”, who are also considered owners, so interest rates and payback terms may be more favorable than other sources. You have to be a member to get a loan, though the requirements are typically easy to meet. Credit unions may not be as convenient as other choices due to fewer locations and/or less services.

Commercial Banks. The old joke about banks only loaning money to people who don’t need it has some basis in truth. While membership isn’t required to borrow money, you will have to meet the bank’s minimum credit requirements, which might be stricter than those of other sources. On the plus side, borrowing costs may be low.

Consumer Finance Companies. Are you looking to borrow a small amount of funds without the hassle of a credit check? If so, a finance company might be the way to go. Be sure you deal with a reputable company, and be ready to pay a relatively high interest rate.

Credit Cards. Obtaining a cash advance or using a convenience check sent by the card company can get you an instant loan. However, before you take this route read the fine print in the card agreement. Interest rates and fees add up quickly, even for short-term loans.

Friends and Family. Borrowing from loved ones can mean lower interest rates and flexible terms. But it carries the very real risk of ruining the relationship if you can’t pay the money back. Discuss—and put in writing—all financial terms before the loan is made.

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