4 Alternatives to a Traditional Personal Loan
If you have ever applied for a personal loan from a traditional bank before, you know how cumbersome the process can be. Not only do you need to fill out confusing forms and provide proof of income, but you may need to talk to a banker, too. And if they require a lot of information to process your loan, you may be asked to answer a slew of embarrassing questions to boot.
If traditional personal loans offered the best interest rates, all of this might be worth it. Sadly, that isn’t normally the case. By and large, most personal loans offered by traditional banks charge interest rates as high as market will bear.
If you need cash but don’t want to endure the hassle or expense of pursuing a traditional bank loan, there are plenty of options to consider instead. Check out these alternatives to a personal loan as you continue your search:
Zero Percent Interest Credit Cards
If you want to borrow money for a limited amount of time, a zero percent interest credit card might do the trick. Not only can secure a “free loan” during your card’s zero percent interest introductory offer, but you can get approved easily with good credit.
While all zero percent interest credit cards offer no interest on balance transfers and/or purchases for anywhere from 12- 21 months, you should read the fine print. Once you find the right zero percent card, you can apply and get approved in minutes by filling out an application online.
When it comes to paying off your balance, you can choose to pay the minimum monthly payment or pay more to pay down your loan faster. Be forewarned, however, that your balance will begin accruing interest at your card’s regular interest rate once the zero percent promotional offer ends.
Peer to Peer Lending
If you’re not big on traditional banks, peer-to-peer lending is a thoughtful alternative to consider. With P2P lending, you’ll borrow money from individuals who crowdfund loans for profit online. Not only will you generally pay a lower interest rate than what your bank will charge, but you can complete the entire process and application online.
If you’re interested in this concept, check out peer-to-peer lenders like Lending Club and Prosper. With either peer-to-peer lending firm, you can choose a repayment plan that fits your needs and lifestyle.
Home Equity Lines of Credit (HELOCs)
If you have considerable equity in your home, you may be able to borrow against it. With a Home Equity Line of Credit, or HELOC, however, you’ll earn certain benefits that other loans just can’t offer.
Since your home is seen as your “collateral,” banks are able to offer extremely low rates on most HELOCs. Even better, the interest you pay on your HELOC is likely deductible on your taxes if you also deduct the interest on your mortgage.
When it comes to repayment, HELOCs tend to offer flexible terms as well. Most of the time, you can decide your monthly payment, either paying interest only or principal plus interest depending on your needs.
Because online banks don’t have to pay for brick-and-mortar storefronts or tons of staff, they are usually able to offer lower rates on all of their loan products. And since they conduct the bulk of their business on the web, you won’t have to visit an actual bank branch to apply for your loan, either.
When considering a personal loan from an online lender, it pays to shop around. Interest rates can vary greatly, as can the quality of customer service you receive, fees you’ll be asked to pay, and any perks your bank offers.
Repayment terms may also be flexible depending on the loan and lender you choose. Just make sure you read all of the fine print before you sign up.
If you dread the thought of stopping by your bank for a loan, you can rest assured there are plenty of additional options to consider. By taking the time to compare each bank’s benefits and drawbacks, you can find the right personal loan for your needs.