Whether you need quick cash to replace your broken-down refrigerator or you need to borrow for your child’s post-secondary education, you have a whole host of options at your disposal. The credit market is vast, and lenders are always coming up with ingenious ways to lend you money – at a price, of course.
Thanks to historically low interest rates, borrowing money has never been cheaper. There is a reason why it is called easy or cheap money. If interest rates in Canada ever dip into subzero territory, then Canadian borrowers could enjoy the privileges that some Swedish borrowers are getting: being paid to borrow. It could be some time before Ottawa adopts a negative-interest-rate-policy (NIRP), so until then you need to calculate which method of borrowing is right for you and then move on from there.
Are you in the market to borrow? Let’s explore this enormous industry and see what is right for you. Here are nine ways on how to borrow money when you need the cash:
1. Cash Advance
When you need cash quick, cash advances are an affordable and convenient way on how to borrow money. If you have a credit card and you do not necessarily want to swipe, tap, or insert to get the cash you need, you can always take a cash advance from your Visa, Mastercard, or American Express.
Every lender will have its own rates, but generally, you will pay an upfront fee of about two percent and then an interest rate (usually 19 percent).
2. Payday Loan
Do you need to borrow money in an emergency? Did your refrigerator, automobile, or computer break down? If so, a payday loan would be a great option to raise funds in a short amount of time. Despite all the lamentations on this financial product, the payday loan is quick and easy to get.
If you are a financially responsible person who repays the microloan on time, then you do not need to be worried about the egregious loans and charges.
3. Line of Credit
Have you noticed in recent months your financial institution bombarding you with offers of lines of credit? If not, then pay attention because you will inevitably get one offer per week. And you know what? If you need a way on how to borrow money, then do consider a line of credit.
A line of credit is a popular way of how to borrow money, since it offers some of the lowest interest rates around. Also, if you are a new client, then you will be given an introductory offer, like zero interest for 90 days, for example. You can receive a line of credit of a couple of thousand dollars or tens of thousands of dollars.
4. Personal Loan
While you will not be able to apply for a personal loan of $250 from your bank, you can obtain a personal loan of, for instance, $15,000. Depending on your branch, you might receive favourable rates and terms. At the same time, depending on your credit history, it might be difficult to receive the best conditions for a personal loan.
Do your research, shop around, and be sure to negotiate with the lender.
5. Credit Card
If you do not need cash, then you can certainly take advantage of the piece of plastic in your wallet.
Rather than going through the hassle of filling in applications, speaking with customer service representatives, and checking your credit score (though, you should do this), you can simply swipe, insert, and tap when you need to. You might also benefit if you have a rewards card at your disposal.
6. Home Equity Line of Credit (HELOC)
While your home should not serve as a cash ATM, it can help you when you are in financial trouble. Indeed, too many homeowners these days are house-rich but cash-poor as they are illiquid.
So, when you need to borrow, then you could consider a home equity line of credit, or a HELOC. This product allows you to borrow against the equity you built up in your home. By taking advantage of a HELOC, you do not need to worry about additional high fees, egregious interest charges, and anything else typically associated with a loan.
7. P2P Lending
Thanks to the Internet and high-tech security apparatuses on websites, you can borrow money from your peers.
Instead of visiting a financial institution or sauntering inside a payday loan facility, you can use peer-to-peer (P2P lending). This is when you are borrowing an agreed amount directly from someone on the Internet (Joe from Yellowknife or Jane from Winnipeg). The two parties agree to an interest rate and the middleman is the website.
8. Credit Union
Since many people are getting fed up with traditional banks, a growing number of consumers are turning to credit unions. These are member-owned financial organisations that are established and operated by members.
What makes a credit union attractive is that it offers all the benefits of a conventional financial institution (chequings, savings, investment products, and other) but at a lower cost. You do not need to worry about excessive overdraft charges, for example.
Ditto for borrowing. Credit unions do have borrowing instruments available, and each organisation will come up with a borrowing mechanism that is tailored to your needs.
9. Margin Accounts
A margin account is a bit more advanced way of borrowing money. It only applies to those who trade stocks, exchange-traded funds (ETF)s, commodities, and other financial products. A margin account is when the broker lends the customer cash to buy equities. The loan is then collateralized by the securities purchased.
Investing with borrowed money can be dangerous because while it will enhance profits it could magnify losses. Use this method to borrow money at your own risk.