How to Borrow Money
At some point, you may need to borrow money to cover an expense. If you’re unsure of how to borrow money or would like to know what options are available to you, keep reading. We’ve created this guide to borrowing money so that you’re well-prepared to tackle any financial roadblock that may come your way.
How to borrow money against assets
There are a number of reasons you may need to borrow money, from medical bills to unpaid rent. No matter what your situation is, understand there are many different ways to borrow money.
Each option will likely come with its own requirements, interest rate, term, and repayment schedule. So, it’s a good idea to explore all of them so you can make the right decision for your particular circumstances.
If you own a house
If you’re a homeowner, you can borrow money against your home’s equity. Your home equity is the difference between what you owe on your mortgage and your home’s current value. Many lenders will allow you to borrow up to 75% to 90% of your available equity through home equity loans, provided you can prove your income can cover the monthly loan payments.
Home equity loan
With a home equity loan, you can secure a lump sum of cash and pay it back through fixed monthly payments that stay the same over a set period of time. If you know exactly how much money you need to borrow, have a good amount of equity in your home, and need all of your funds at once, a home equity loan can provide stable rates and high borrowing limits.
Home Equity Line of Credit (HELOC)
A HELOC is similar to a home equity loan, where the borrowing amount is based on your home’s equity, but as a line of credit you can keep interest charges low by withdrawing only the amount you need. During the 5- to 10-year draw period, you can borrow as you like and only pay interest against the borrowed portion. Once the draw period is over, the 10- to 20-year repayment period will begin, where the amount you withdrew from the line of credit is repaid over the agreed term.
You’ll have to pay back the principal and any interest on the amount you borrowed. HELOCs are ideal if you want flexibility. But, they usually come with variable interest rates that fluctuate and can be difficult to budget for.
Cash out refinance
When you opt for a cash out refinance, you take out a loan for more than you currently owe on your mortgage; your original mortgage is paid off, resulting in a new home loan. This strategy gives you the chance to keep the difference as cash and use it for anything you’d like. If you agree to a cash out refinance, you’ll have to pay closing costs on the entire amount of your home loan.
If you own a car
If you own a car or truck, you can use it as a security for a loan. Here’s how.
A title loan can give you cash in exchange for your vehicle’s title. It can be an option if you have a paid off car and title with your name on it. Once you agree to the terms and payment schedule of a car title loan after your car is appraised, you can get the money right away. You’ll be able to drive your car while you pay the title loan back.
If you own investments/business
If you have an investment portfolio or own a business, there are a few additional ways you can borrow money including:
A 401k loan differs from other loans because you’re the only lender involved. With a 401k loan, you access your retirement savings early and pay them back with interest. You can borrow up to 50% of your balance up to a maximum loan amount of $50,000, although you may have to pay penalty fees for moving the funds.
Personal loan based on business property
Some personal loan lenders will let you use business assets like your commercial property, equipment, or company car as collateral. If you don’t have the best credit, these assets can increase your chances of approval. You’ll borrow a fixed amount of money and pay it back with interest in monthly installments.
How to borrow money without assets
You might not be able to or want to borrow money against your house, car, investments, or business. If this is the case, consider these alternative options. You won’t need a high credit score or expensive asset to secure approval for these loan types. Availability of each loan type varies by state with Advance America.
Payday loans or cash advances are short-term, small dollar loans. With a payday loan, you can cover your expenses until you get your next paycheck. You’ll pay it back within two to four weeks, usually with a fee tacked on based on the amount you borrow. Advance America offers payday loans with a simple application process that you can complete online or in an Advance America location, with decisions in as little as 24 hours.*
If you’d like to borrow slightly higher amounts than a Payday Loan and want more time to pay back a loan, an installment loan will boost your borrowing limits. Installment loans allow you to borrow a set amount of money and repay it over 3 to 36 months via fixed monthly payments. Installment loans at Advance America feature a simple application process that you can complete online or in-store.
Lines of credit
A line of credit is similar to a credit card. It can give you the flexibility to draw as much or as little money as you would like up to a certain credit limit. Once you take out a line of credit, you’ll repay it all at once or through scheduled payments.
Benefits of borrowing money with a loan
Here are some ways that borrowing money with a loan may benefit you:
If approved, you can receive funds quickly
Many online lenders have a quick approval process, and you may even get an instant decision once you apply. If approved, you can usually receive the funds in your bank account very quickly. Advance America offers an instant approval decision, and you may get your money the same day you apply.*
You don’t need good credit
Depending on the loan and lender, you may not need good credit to get approved. Advance America loans, such as payday loans and installment loans, are an option for borrowers without good credit. You may still be able to get approved for a loan from us if you have poor or fair credit.
Loans can be very versatile
Personal loans are usually very versatile, and you can use your funds to cover many different costs. Whether you need extra cash to cover a car repair or go on vacation, your loan can serve many different purposes.
Paying off your loan can help improve your credit score
If you make your loan payments on time, you can build a positive payment history and improve your credit score over time. Having a good credit score may make it easier for you to take out more loans in the future.
What is the best way to borrow money?
Consider your needs, preferences, lifestyle, and budget to determine the best way to borrow money. If you’d like more information on payday loans, installment loans, title loans, or lines of credit, don’t hesitate to contact us today! Advance America offers all of these options and would be happy to assist you.
*Online approvals before 10:30 AM ET (M-F) are typically funded to your bank account by 5 PM ET same-day. Approvals after 10:30 AM ET are typically funded in the morning the next banking day.