16 Ways to Borrow Money on Credit

When it comes to borrowing money, there are several options available. The best one for you depends on your financial situation, credit score, and personal preferences. Here we will explore 16 ways to borrow money: Unsecured loans like personal loans, installment loans, loan apps, buy now pay later, credit cards and more. Further down we will explore secured loans like a 401(k) Loan and Pawnshops.

We will discuss the pros and cons of each option, and provide you with the information you need to make an informed decision.

Unsecured loans

1. Personal Loans from an Online Lender

Online lenders are financial institutions that operate entirely on the internet. They offer personal loans, which are unsecured loans that you can use for any purpose. The application and funding process is fully online, which offers convenience and speed.

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  • Online lenders cater to a wider variety of consumers, including those with fair and bad credit scores. These loans are often called bad credit loans.
  • They offer pre-qualification and comparison of lenders to help find the best annual percentage rate (APR), which depends on factors like credit score and income.
  • Online lenders do a soft credit check during pre-qualification, so it doesn’t impact your credit.


  • Some online lenders may have higher APRs compared to banks or credit unions.
  • They may also have stricter requirements for loan approval.

2. Installment Loans from an Online Lender

Installment loans from online lenders are a type of personal loan that you repay over a set period of time in regular, usually monthly, installments. These loans are typically used for larger expenses, such as home improvements or major purchases.

Pros of borrowing money from an online lender:

  • Online lenders don’t have the costs of maintaining physical branches, which can result in lower rates.
  • They often offer a user-friendly digital loan application experience, making the process more convenient.
  • Fast funding, with money deposited into your bank account in as little as one or two business days if approved.

Cons of borrowing money from an online lender:

  • There is a wide range of loan types offered by online lenders, so it’s important to research their reputation and compare interest rates and terms with traditional lenders.
  • Some online lenders offer loans with terms similar to payday loans, which can have high interest rates and fees, so it’s important to read the fine print before accepting an offer.

3. Loan Apps

Loan apps are digital platforms that provide small advances on your paycheck, sometimes instantly. These apps are a convenient way to borrow money, especially for short-term needs. Most cash advance apps charge a subscription fee or optional tip. For instance, an app like Earnin gives advances from $100 to $750, doesn’t charge interest, but requests a tip up to $14 for each advance.

Pros of Loan Apps:

  • Instant access to funds.
  • No interest charges.
  • Flexible borrowing amounts.

Cons of Loan Apps:

  • May require a subscription fee or tip.
  • Not suitable for large borrowing needs.

4. Buy Now, Pay Later

Buy now, pay later plans let you purchase items now and pay for them over a series of installments, usually without interest or fees. Many retailers offer these payment plans during the online checkout process and sometimes in-store. Companies like Afterpay, Klarna and Affirm offer these services, with varying terms. Afterpay never charges interest but may charge a fee for late payments, while Affirm charges interest depending on the repayment term. This can be a cheap way to borrow for necessary expenses if you can get a zero-interest payment option, but it can also lead to overspending.

Pros of Buy Now, Pay Later:

  • Immediate access to goods or services.
  • Interest-free payment options.
  • Flexible repayment terms.

Cons of Buy Now, Pay Later:

  • Potential for overspending.
  • Late payment fees.
  • Interest charges may apply depending on the provider and repayment term.

5. Personal Loans from a Bank

Banks are traditional financial institutions that offer a variety of services, including personal loans. These loans can range from a few hundred dollars to $50,000 or more, and banks typically offer the lowest APRs.


  • Banks typically offer the lowest APRs for personal loans.
  • Some banks may provide an additional APR discount to existing customers.
  • Banks may offer perks like flexible payment options to help manage loan repayment.
  • Pre-qualification is available at most banks to preview the loan’s rate and term before a formal application is submitted.


  • Good credit is usually required to get approved through a bank.
  • Some banks may have stricter requirements for loan approval.

6. Withdraw Money from a Credit Card

Withdrawing money from a credit card, also known as a cash advance, is a way to access cash quickly. This involves borrowing against your credit card’s line of credit.

Pros of getting a cash advance from a credit card:

  • Access to cash without filling out an application or going through a credit check, which can be beneficial in emergency situations.
  • Quick access to money, as you can usually withdraw cash from an ATM or bank immediately.

Cons of getting a cash advance from a credit card:

  • Cash advances often come with fees and high interest rates, making them an expensive way to borrow money.
  • There is no grace period for cash advances, meaning interest charges start immediately, unlike purchases where you typically have a grace period before interest starts accruing.

7. Personal Loans from a Credit Union

Credit unions are not-for-profit financial institutions that offer a variety of services, including personal loans. They often offer lower rates than banks, especially for those with bad credit.


  • Credit unions may offer lower rates than banks, especially for those with bad credit.
  • Loan officers consider the overall financial picture instead of relying heavily on creditworthiness.
  • Credit unions offer a variety of loan types, including secured personal loans.


  • Becoming a credit union member is necessary before applying for a loan.
  • Some credit unions may have stricter requirements for loan approval.

In conclusion, the best way to borrow money depends on your individual circumstances and needs. It’s important to compare different lenders and loan options to find the best fit for you.

8. Personal Line of Credit

A personal line of credit behaves like a hybrid between a loan and a credit card. It is offered by some banks and credit unions. Once approved, you draw only what you need and pay interest only on the amount you use. This makes it ideal for borrowers who aren’t sure how much they need to borrow. Borrowers with good or excellent credit likely have the best chance of getting the lowest rates.

Pros of Personal Line of Credit:

  • Flexibility to draw only what you need.
  • Interest is charged only on the amount used.
  • May offer lower rates for borrowers with good or excellent credit.

Cons of Personal Line of Credit:

  • May require good or excellent credit for approval.
  • Interest rates can be high if your credit score is not strong.

9. Payday Loans

Payday loans are short-term financial solutions that are typically associated with high fees, equivalent to annual percentage rates (APRs) of almost 400%. These loans, which usually range from $100 to $1,000, are designed to be repaid in full by the borrower’s next payday. They are accessible from both online and physical payday lenders and do not require a traditional credit check. Read here is what you need to qualify for a payday loan.

Pros of Payday Loans:

Cons of Payday Loans:

  • High interest rates and fees
  • Short repayment period
  • Potential cycle of debt due to difficulty in repayment

Despite their accessibility, borrowers often struggle to repay payday loans on time, leading to renewals and additional fees, creating a cycle of debt.

10. Peer-to-Peer Lending (P2P)

Peer-to-peer (P2P) lending, also known as social lending or crowdlending, is a method of financing that enables individuals to borrow and lend money directly to each other. This form of lending is facilitated through online platforms where borrowers receive financing from individual investors who are willing to lend their own money for an agreed interest rate. The loans generate income for the lenders in the form of interest, making P2P loans an alternative source of financing, especially for borrowers who are unable to get approval from traditional sources.

Pros of P2P Lending:

  • Direct interaction between borrowers and lenders.
  • Interest rates may be lower than traditional banks.
  • It provides an alternative source of financing for those who can’t get approval from traditional sources.

Cons of P2P Lending:

  • Loans may not be fully funded.
  • Interest rates can be high for borrowers with poor credit.
  • There’s a risk of default for the lenders.

Secured loans

11. 401(k) Retirement Account Loan

A 401(k) loan allows you to borrow money from your own retirement savings. You then repay the loan, with interest, back into your account.

Pros of borrowing money from your 401(k):

  • No credit check required, making it a good option for those with poor credit.
  • You can borrow up to $10,000 or 50% of your vested account balance, whichever is greater, providing a substantial amount for larger expenses.
  • Interest paid on the loan goes back into your 401(k), so you’re essentially paying interest to yourself.

Cons of borrowing money from your 401(k):

  • If you leave your job, you may be required to repay the loan in full before your next federal tax return is due, which could put you in a financial bind.
  • Potential tax penalties if you can’t repay the loan, adding to the cost of borrowing.
  • You miss out on investment returns on the money withdrawn from your 401(k), which could impact your long-term retirement savings.

12. Pawnshop Loan

A pawnshop loan is another way to borrow money, especially when you need cash quickly. Similar to a secured loan from a bank, a pawnshop loan requires you to provide an item of value as collateral. This could be jewelry, antiques, or electronics. The pawnshop will assess the item’s value, condition, and resale potential before making an offer.

See Pawnshops near you here.

If you agree to the loan amount, you receive the cash and a pawn ticket. You can reclaim your item once you repay the loan. However, if you fail to repay the loan within the stipulated time — typically 30 days — the pawnshop retains the item.

While a pawnshop loan doesn’t require a credit check, it can come with high interest rates and additional fees for storage, appraisal, and insurance. These costs can result in an Annual Percentage Rate (APR) as high as 200%.


  • Quick access to cash
  • No credit check required
  • Collateral-based, not credit-based


  • High interest rates and additional fees
  • Risk of losing valuable items
  • Short repayment period

13. Home Equity Loans

Home equity loans or home equity lines of credit (HELOC) are financial products that allow borrowers to borrow against the equity in their homes. Home equity loans are installment loans, where borrowers receive a lump sum and repay it over time (usually five to 30 years) in regular monthly installments. HELOCs, on the other hand, are revolving credit, similar to a credit card, where borrowers can draw from the credit line as needed during a “draw period” and pay only the interest on the amount borrowed.

Pros of Home Equity Loans:

  • Access to large amounts of money
  • Fixed interest rates (for home equity loans)
  • Flexible usage of funds (for HELOCs)

Cons of Home Equity Loans:

  • Risk of losing your home if you default
  • Potential fees and closing costs
  • Variable interest rates (for HELOCs)

HELOCs generally have variable interest rates, while home equity loans have fixed interest rates. Both options should be considered carefully due to the risk of losing your home if you default on the loan.

14. Mortgages

Mortgages are a traditional source of funds for individuals looking to borrow to fund a new home. Banks offer a variety of ways to borrow money, including mortgage products, personal loans, auto loans, and construction loans. They also offer opportunities to refinance an existing loan at a more favorable rate. However, banks tend to have high costs associated with loan applications or servicing fees. Banks may also resell loans to other banks or financing companies, which may mean that fees, interest rates, and procedures may change, often with little notice.

Pros of Mortgages:

  • They allow individuals to purchase homes without paying the full price upfront.
  • Interest rates are typically lower than other types of loans.
  • They can be refinanced for more favorable rates.

Cons of Mortgages:

  • They often come with high costs and fees.
  • Banks may resell loans, leading to changes in fees, interest rates, and procedures.
  • Failure to repay can result in the loss of the home.

15. Student Loans

Student loans are financial aids used to cover college and graduate school expenses. They are available from both the federal government and private lenders. Federal student loans are more desirable as they offer benefits such as deferment, forbearance, forgiveness, and income-based repayment options. They do not require a credit check and have standardized terms for all borrowers.

Pros of Student Loans:

  • Access to higher education
  • Federal loans offer flexible repayment options and benefits
  • No credit check for federal loans

Cons of Student Loans:

  • Long-term financial commitment
  • Private loans may require a credit check
  • Private loans may have higher interest rates and less flexible terms

On the other hand, private student loans usually require a credit check, and each lender sets its own terms, interest rates, and fees. Private student loans do not offer the same benefits as federal student loans.

16. Auto Loans

Auto loans are specialized loans specifically designed to help you purchase a vehicle. These loans are usually secured, meaning the car itself serves as collateral for the loan.

Pros of Auto Loans:

  • Competitive interest rates are often available, especially if you have good credit.
  • Flexible terms, allowing you to choose a repayment schedule that fits your budget.
  • Enables you to purchase a more expensive vehicle than you could afford with cash, improving your quality of life or meeting specific needs like a family car.

Cons of Auto Loans:

  • Depreciation of the vehicle means you might owe more on the loan than the car is worth at some point.
  • Failure to make timely payments could result in the repossession of your vehicle.
  • Interest costs can add up over time, making the car more expensive than the sticker price.

Business Loans – Can be both secured and unsecured

Business loans are financial products designed to provide capital for running or expanding a business. These loans can be secured or unsecured and come in various forms, including term loans, lines of credit, and merchant cash advances.

Pros of Business Loans:

  • Access to larger sums of money can help accelerate growth or fund new business ventures.
  • Interest on business loans is often tax-deductible, reducing the effective cost of borrowing.
  • Many lenders offer specialized business loans tailored to specific industries or needs, providing more relevant financial solutions.

Cons of Business Loans:

  • Qualifying for a business loan often requires a solid business plan and financial statements, which not all businesses have.
  • Failure to repay the loan could result in severe financial consequences, including the liquidation of business assets if the loan is secured.
  • Interest rates can be higher than other forms of credit, especially for businesses that are considered high-risk.

Alternative to borrowing money from banks

Borrowing money from family and friends can be a viable option when you’re in a financial bind. This method of borrowing is often quicker and less formal than traditional lending options. It can be particularly beneficial for those who need money urgently or are concerned about their credit score affecting their loan eligibility.

However, it’s important to approach this option with caution. Borrowing money from loved ones can potentially lead to conflicts or strained relationships. To avoid misunderstandings, it’s advisable to establish clear terms and conditions for the loan and have them documented and notarized.


  • Quick and less formal process
  • No credit score requirement
  • Potentially lower or no interest rates


  • Potential for personal conflict
  • Lack of legal protection
  • Possible strain on relationships

Examples of using credit to Borrow money

Using credit often involves making transactions through a credit card. According to Transunion’s Q4 2022 Credit Industry Insights Report, the number of people using credit cards rose to 166 million, showing an increase compared to the numbers from the last three years. According to a research from Federal Reserve in 2021, 83% of all people in the U.S. own at least one credit card in year 2020.

Alternatively, you might opt for borrowing money through a loan, which is another form of credit. Common types of loans include student loans, personal loans, and mortgages.

Essentially, leveraging credit allows you to acquire goods or services now and make payments at a later date. This deferred payment structure is what makes credit a flexible financial tool.

Credit cards are commonly used for routine expenditures, such as:

  • Grocery shopping
  • Personal services: This can include anything from salon visits to professional consultations.
  • Everyday shopping: Clothing, electronics, and other consumer goods often fall under this category.
  • Fuel for your vehicle.

On the other hand, loans are generally reserved for more substantial financial commitments. According to Transunion, 22.7 million Americans have taken out personal loans, and together they owe a total of $232 billion. This data highlights the widespread use of personal loans as a form of credit in the United States.

Loans are often used for:

  • Debt Consolidation: This involves taking out a new loan to pay off multiple debts.
  • Acquiring furniture: Many furniture stores offer financing options, which are essentially loans.
  • Investing in education: Student loans are a significant source of educational funding.
  • Purchasing a vehicle or real estate: Auto loans and mortgages are specialized loans designed for these high-value purchases.

According to a report by the Federal Reserve, credit cards are the most frequently used form of consumer credit, especially for smaller, everyday transactions.

Loans, particularly personal or consolidation loans, are more suited for larger, long-term investments that require structured repayment plans.

The Process of Using Credit:

  1. Borrow the necessary funds via your credit card or loan.
  2. Procure the desired item or service.
  3. Repay the borrowed amount over time, along with any applicable interest.

According to Transunion’s Q3 2022 Quarterly Credit Industry Insights Report (CIIR), the average credit card debt per borrower was $5,474, marking an increase of approximately $617 compared to the same period in the previous year.

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