11 Best Ways to Borrow Money

When you need to borrow money, understanding your options is key. Each choice has advantages and drawbacks, from personal loans and home equity lines of credit to peer-to-peer lending and cash advance apps. Choosing the right one comes down to aligning your funding needs with the overall costs of borrowing.

We’ve listed the most cost-effective and quickest ways to borrow money, highlighting how each method works and what to watch out for. You’ll also find practical advice to help you avoid high-risk options and make smart decisions that protect your financial health and save you money in the long run.

Inexpensive borrowing starts with options like personal loans, 0% APR credit and home equity loans. These choices offer low interest rates, helping you manage your finances effectively without getting caught in high-cost debt. Of course, borrowing from trusted family and friends may be even cheaper or, better yet, free.

For those with good credit, personal loans from banks and credit unions can offer some of the lowest interest rates available. Credit unions often have even better rates than banks since they prioritize member benefits over profits. With fixed repayment terms, these loans deliver predictability and a clear plan to manage debt. To find the best rate, compare multiple offers and prequalify without impacting your credit score, which helps ensure you secure the most cost-effective loan.

A 0% annual percentage rate (APR) credit card lets you borrow interest-free for a set period, often between six and 21 months. It’s suitable for short-term needs or significant purchases if you can repay the balance in time. Establish a repayment plan that clears the debt before interest applies to avoid the high rates that kick in after the promo period. This approach allows you to maximize the benefits of interest-free borrowing while avoiding unexpected costs.

Home equity loans and home equity lines of credit (HELOCs) offer low interest rates since they are secured by your home. A home equity loan provides a lump sum at a fixed rate, while a HELOC gives you flexible access to funds with a variable rate. Both are cost-effective for significant expenses like renovations or debt consolidation, but missing payments could put your home at risk. Carefully assess your ability to repay over time to avoid jeopardizing your home’s equity.

“Buy Now, Pay Later” (BNPL) options let you break purchases into interest-free installments without requiring a solid credit history. This method can be handy for smaller, manageable purchases, but use it cautiously to avoid overspending and accumulating multiple payments. Stick to purchases you can comfortably pay off within the installment period, and monitor your payment schedule to stay on track and avoid unnecessary fees.

When dealing with unpredictable expenses like home repairs or medical bills, a personal line of credit offers a flexible borrowing option. This revolving credit line allows you to withdraw money as needed and pay interest only on the amount used, providing more control over your finances than a fixed loan. Manage this line of credit wisely to avoid overspending and ensure timely repayments to maintain financial stability.

Peer-to-peer lending platforms connect borrowers directly with individual investors, providing loans at lower rates and with more lenient qualifications than traditional banks. This alternative is especially appealing to those with lower credit scores who may face higher costs elsewhere. However, P2P loans can have complex fee structures and varying terms, so thoroughly compare platforms and understand all conditions before committing to avoid unforeseen expenses.

Accessing funds through a 401(k) loan involves borrowing against your retirement savings, allowing for relatively low interest since you’re using your own money. While this can provide a lifeline during financial hardship, it comes with the risk of reducing your future nest egg and potential penalties if you don't repay on time. Carefully evaluate whether this option is worth the potential long-term impact on your retirement security before proceeding.

Borrowing money from personal connections can offer a low-cost solution with minimal or no interest and flexible repayment terms. However, it’s important to recognize the potential impact on relationships if expectations aren’t clear. To protect both parties, formalize the loan with a written agreement detailing repayment schedules, amounts and any interest to avoid misunderstandings and maintain trust.

When you need money fast, options like online lenders, cash advance apps and credit card advances can provide fast access. However, weigh their potential drawbacks, such as higher interest rates or fees, to make informed decisions.

Online lenders offer an efficient way to secure funding quickly. They approve loans and disburse money within one to five days. More lenient eligibility criteria make them accessible to a broader range of borrowers, including those with lower credit scores. However, interest rates and fees can vary widely across these platforms, so shop around and compare offers to find a deal that best suits your financial situation.

Cash advance apps provide access to small amounts of cash against your future paycheck, typically without traditional interest charges but with a subscription or service fee. While useful for urgent expenses, overuse can lead to a cycle of frequent fees and dependency on short-term borrowing. To maintain financial health, limit reliance on these apps to situations where you can repay quickly and avoid creating a pattern of recurring debt.

Withdrawing cash from your credit card at an ATM or bank is another quick way to access funds in emergencies, but it has significant drawbacks. Cash advances generally carry high interest rates from day one, they come with additional transaction fees and have borrowing limits that are usually lower than your regular credit limit. Use this option sparingly and aim for fast repayment to minimize the financial burden and avoid accumulating long-term debt.

Although some loans offer quick cash or easy access, others come with serious risks that could damage your financial health. High interest rates, predatory practices and collateral requirements make certain borrowing choices more hazardous than they may seem.

Smart borrowing involves strategies that lower your costs while making debt easier to manage. Simple steps like improving your credit score or consolidating debt can help you secure better rates and repayment terms.

• Consider Debt Consolidation: Consolidating multiple debts into a single loan can simplify payments and lower your overall interest rate. Options like personal loans or balance transfer credit cards can help merge debts, making repayment more manageable.
• Budget for Repayment: Manage your finances using the 50/30/20 rule — allocate 50% for necessities, 30% for discretionary spending and 20% for savings and debt payments. Prioritize debt repayment and build an emergency fund to cover unexpected expenses and minimize financial stress.
• Be Cautious With Emerging Financial Technologies: While mobile lending apps and decentralized finance (DeFi) platforms offer quick loans, they often come with high fees or risks. Always assess terms carefully and compare them to other borrowing options.
• Build a Strong Credit Score: A strong credit score can get you better interest rates and loan terms. Focus on timely bill payments, lowering outstanding debt and regularly reviewing your credit report to catch any errors.

Understanding loans and credit is easier with the right guidance. Here’s a quick guide to some of the most common questions about borrowing money.