Are you wondering how to borrow money fast? Then, you’re in the right place.
It is so easy to rack up thousands of dollars in credit card debt alone.
However, it can be challenging trying to pay off your debt faster.
So borrowing money is something you will have to consider carefully.
This is because there might be repercussions later down the road.
This post will learn about the best ways to borrow money and pay it back fast.
What is Borrowing of Money?
Borrowing money is the process of getting funds or an amount against a promise to pay it back on a certain date.
Money is one of the essential things in our day-to-day life.
But there are times when we don’t have enough money to afford particular needs. This is where borrowing money comes into play.
Unfortunately, money borrowing is one way that many people find themselves in big trouble today.
You may want to borrow money for any number of reasons.
Perhaps you need to make some home improvements or cash for a new car or college tuition.
Whatever the reason, it’s important to know how borrowing works and find the best ways to do it.
What are the Types of Borrowing?
There are different types of money borrowing. But the are all categorized into two.
- Secured Loan: This is a type of borrowing that is backed with assets. Should the borrower default, his or her assets will be confiscated.
- Unsecured Loan: This type of loan is not backed by collateral or assets. However, it usually comes with high-interest rates.
The following are the other types of borrowing that fall under secured and unsecured loans:
Mortgages are the most common method of borrowing. This is a type of loan you secure to buy a property.
Mortgage loans often cover the total amount of the purchase price of a piece of property and allow you to pay back the loan in regular installments over time.
Home Equity Loan
The equity in your home gives you the freedom to borrow money. That means you can take out a loan for the full value of the house or less.
What you use that money for is up to you. Home equity loans usually have low-interest rates because your home is used as security.
A personal loan is a fixed-term loan you take from a bank, credit union or line of credit. You can use the money for anything.
Perhaps you need money to renovate your house or just to go on that dream vacation.
Maybe you want to buy a car but simply cannot afford it. Whatever the reason, a personal loan may help solve your problems.
Credit Card Advances
If you’re struggling to make ends meet because of sudden expenses, such as medical bills or travel costs, a credit card cash advance may be the solution for you.
A credit card advance is a short-term loan from your credit card account. The interest rates of credit cash advances vary from card to card.
This is a type of loan that you must repay on your subsequent payday.
It helps you meet sudden expenses before your paycheck.
Bank overdrafts are a kind of short-term loan provided by banks to help you deal with a temporary cash deficiency.
Note that banks charge fees and high interest for this type of loan.
Why Borrow Money?
Borrowing money is often seen as a necessity. However, you need to be 100% clear on what it is that you’re borrowing money for before doing so
This will prevent you from finding yourself in difficulties down the road.
So ask yourself these questions:
- Will the loan be used for purchasing a car or a home?
- Will it be used to pay down existing debt?
- Is it going to be used to supplement your current cash flow?
Knowing what the money will be used for will help you understand the cost of borrowing it.
What is the Cost of Borrowing Money?
Before you borrow money, you should find out the cost.
The cost of borrowing money is more than just the interest rate. Many factors impact how much it costs to borrow money.
Thus, to have a complete picture of the cost of borrowing money, ask yourself the following questions:
How Much Do You Need?
Borrowing money is a necessity for many. But the question is, how much do you need?
Knowing the amount of money you need is the first step in the process before you start looking for a lender.
To determine the amount you need, assess your financial situation. Identify arrears you can cut non-essential expenses to reduce your loan amount.
How Long Do You Want to Borrow?
After knowing the amount you need, the next thing is to determine the duration of your loan repayment.
This makes a considerable difference regarding what type of loans you can take out and what interest rate you will be charged.
Whether it is a short-term or long-term loan, ensure you can commit to the loan timeframe.
What is Interest in Terms of Borrowing Money?
When deciding to borrow money, it’s important to be as educated as possible. Knowing the specifics about the loan you’re applying for is imperative.
If you have no idea what kind of interest rate or fees you may be eligible for, you may be in for a bigger surprise.
Thus, confirm the interest rate being offered by your lender and ensure you’re okay with it.
Saving and Borrowing Money
Saving and borrowing money are vital parts of personal finance.
Thus, understanding them is essential if you want to manage your personal finance well.
When you are saving, interest is working in your favour. It makes your money worth more.
On the other hand, when you’re in debt, interest is working against you in someone’s favour.
That’s to say; you have no business borrowing money when you have savings.
Else, your loan interest may consume your savings and worsen your financial situation.
Similarly, avoid saving money when you’re in debt. Instead, you should focus on paying off debt to save costs.
How Can I Borrow Money Fast? 7 Best Ways
1. Borrow from Friends/Family
You can borrow money from your friends or family fast. Borrowing from friends or family is one of the only ways to get a loan without interest and collateral.
Also, borrowing money from friends or family saves you from a credit check.
However, ensure that you keep to your side of the deal. Else, you damage your relationship.
Pros of Borrowing from Friends/Family
- There may be no interest in payback
- No credit check
- You have more flexibility in paying back
Cons of Borrowing from Friends/Family
- You could harm your relationship if you’re unable to pay back
- You could endanger your friend or family in the case of default.
2. Borrow from Line of Credit
A line of credit is a flexible way to borrow money for any purpose. With a line of credit, you can consolidate all your debt using one low-interest loan.
How to Qualify for a Personal Line of Credit?
Requirements vary from one line of the credit provider to another. However, the major requirements for a personal line of credit are a good credit score and history.
Pros of Borrowing from a Line of Credit
- Low-interest rates
- Few restrictions
- Constant access to funds
- Flexible repayment options
Cons of Borrowing from a Line of Credit
- Maintenance fees
- Requires good credit score for lower interest
- It tempts you to borrow more
3. Borrow from Home Equity Line of Credit (HELOC)
With HELOC, you can borrow money through your home equity.
This type of loan is the most effective because it has low-interest rates. However, HELOC is so risky as you can lose your home if you default on your loan.
Pros of Borrowing from HELOC
- Low-interest rates
- No closing costs
- No fees for cash withdrawals
Cons of Borrowing from HELOC
- Interest rates may increase
- You may never get out of debt if you make only the minimum payment
- You may lose your home value
4. Borrow from a Bank
If you need money and just don’t know where to turn, you can turn to your bank. Getting a loan from your bank is fast once you meet the requirements.
Different banks have different interest rates. But you get a low-interest loan from your bank with flexible repayment periods.
Pros of Borrowing from a Bank
- Low-interest rates
- Flexible repayment periods
- Faster loan process
Cons of Borrowing from a Bank
- Interests are tax-deductible
- You may lose your assets
- High standards
5. Borrow from Credit Unions
You can also borrow money fast through a credit union. Credit unions are not-for-profit financial organizations that people join based on their job, location, or other common bonds.
Thus, a credit union is a cost-effective means to borrow money because it has one of the lowest interest rates and fees.
Pros of Borrowing from a Credit Union
- Favourable rates
- Low fees
- Easy access
Cons of Borrowing from a Credit Union
- Limited loan options
- Membership payment is required
6. Borrow through Credit Cards
You can borrow money through your credit card. That’s, through credit card cash advance.
Credit card advances are short-term loans provided by your card issuer. They have different interest rates based on the card issuer.
Pros of Borrow through Credit Cards
- Fast money access
- It gives you cash advances
- It helps build a credit history
Cons of Borrowing through Credit Cards
- High-interest rate
- The temptation to borrow more
- Can damage your credit score
7. Borrow from Your RRSP
Finally, you can also borrow money from your Registered Retirement Savings Plan (RRSP).
However, tax penalties apply unless you’re using the money for education or first home purchase.
Also, when you borrow money for education and first home purchase from your RRSP… the money will not be growing tax-free.
So if you must borrow from your RRSP account, it is advisable to repay it within the year.
Pros of Borrowing from RRSP
- Tax-free withdrawal for education and first home purchase
- Low rates
Cons of Borrowing from RRSP
- Permanent loss of contribution room
READ MORE:How to Make Passive Income in Canada
Which Borrowing Option to Choose?
If you’re confused about which of the above money borrowing options is right for you, we’re here to help you.
Fill out this form, and we will get back to you as soon as possible.
Who Can I Borrow Money from Fast?
When it comes to borrowing money fast, knowing who to fall back on is the first step.
Thus, consider the following options when looking for where to borrow money fast:
1. Bank or Credit Union
Banks and credit unions are popular places for getting loans fast. However, they have strict procedures and high standards.
But with banks and credit unions, you can get a quick loan with a low rate and flexible repayment periods.
2. Online Lender
An online lender is a quick way to access loans. Unlike brick and mortar banks, online lenders don’t have strict approval processes.
However, online lenders’ interest rates vary and are often high compared to traditional banks.
3. Private Lender
A private leader is another option for you to borrow money without passing through strict procedures.
Private lenders are companies or individuals that operate privately.
Because they’re very convenient, you can secure a loan quickly through private lenders even if you have a poor credit score.
4. Loan Broker
If you want to pass through the stress of a loan application, contact a loan broker.
A loan broker does the hard job for you by identifying a loan option that suits your situation and applying.
By doing so, you will save time and effort in handling the loan application.
Requirements for Borrowing Money
Although different lenders have different requirements, here are the common requirements for borrowing money:
- Active chequing account
- Credit score
- Steady income
- Proof of employment
- Proof of address
- Social Insurance Number
- Valid I.D.
- Bank statements
How to Pay Off Your Loan Fast?
Once you’ve secured a loan, the thing is to start preparing for repayment.
Creating a loan repayment plan will help you save time and cost in paying off your debt.
Consider the following factors when trying to pay off your loan fast:
- Cut your non-essential expenses
- Create an intervention budget
- Pay more than the monthly requirement
- Create a debt management strategy
- Stop investing
- Create additional streams of income
- Grow your emergency fund.
For a comprehensive guide on how to pay off your loan faster, click here.
Now you can see that borrowing money is not a jump-start endeavour.
Instead, it’s an endeavour that involves specific procedures.
In summary, borrowing money entails the following processes:
- Knowing why you need the money.
- Understanding the cost of borrowing the money.
- Identifying the best option of borrowing the money.
- Applying for the loan.
However, you can be successful in borrowing money but not in paying it back. That’s why you need to have a loan repayment plan as well to avoid contact with a collection agency.
Hopefully, you are now more informed on what borrowing money entails and how to go about borrowing.
FAQs on Borrowing Money
Can You Get a Loan with Bad Credit?
Yes, you can get a loan with bad credit. However, bad credit often attracts high-interest rates.
But you can still qualify for some low-interest loans with bad credit in Canada. This includes a car title loan.
Will Applying for a Loan Hurt My Credit Score?
Applying for a loan and redeeming it on time will improve your credit score.
However, when you make a late payment, it can hurt your credit score.
What is the Difference Between a Secured and an Unsecured Loan?
A secured loan refers to a loan that is backed by collateral. The aim is to protect the lender in case the borrower defaults.
On the other hand, an unsecured loan is a loan that’s not backed by any collateral.
The high risk of an unsecured loan makes it have a high-interest rate to protect the lender.
What is the Cheapest Way to Borrow Money?
When it comes to borrowing money, there’s no one-size-fits-all. So the cheapest way to borrow money depends on your needs and circumstances.
But the common cheapest ways to borrow money are lines of credit and credit cards in Canada.
If you have more questions on borrowing money, let us know in the comment section.
Hi, I'm Adeola Adegoke. I am a licensed Insurance Broker in Manitoba, and I hold a master’s degree in Mathematical Sciences (with a major in Financial Modeling) from the African Institute for Mathematical Sciences (AIMS), Tanzania.
Also, I have a second master's degree in Statistics from the University of Regina, and I am currently pursuing my Ph.D. in Statistics at the University of Manitoba.
The primary purpose of Money Reverie is to help everyday Canadians make better financial decisions by providing up-to-date financial news and information, reports, product reviews, and government programs.