Life is anything but a walk in the park, especially for people in a financial pickle who weren’t born with silver spoons in their mouths. Borrowing money has become common for many individuals with different financial needs. As of early 2024, about 23.5 million Americans have a personal loan, up from 22.4 million in the first quarter of 2023. More than half of these borrowers (55.1%) got a loan to pay off existing debt or to refinance credit cards. A survey by the Financial Conduct Authority also found that 5.1 million adults borrowed money from friends and family members during the height of COVID lockdowns. Unfortunately, many of those relationships ended badly. Don’t let the same thing happen to you.
No matter your reasons for borrowing money, knowing the different ways to get a loan can help with your financial situation. You have several borrowing options to consider, each with pros and cons.
Ways to Borrow Money in Scottsdale, Arizona
Below are popular methods of borrowing, ranging from personal loans from loved ones to more formal options like bank loans and cash advances from credit cards. We’ll also discuss the conveniences of loan apps, traditional pawn shop loans, and Biltmore Loan and Jewelry. By the end of this read, you’ll have a clearer understanding of which money-borrowing option is best for your situation.
1. Borrow Money from a Friend or Family Member
Approaching a friend or family member is one of the easier ways to borrow money. This method gives you access to quick funds without the need for formal application processes, credit checks, or interest rates that accompany traditional loans. However, it also comes with potential risks. A study featured on NBC News Digital found that borrowing cash from friends or relatives usually ends badly. If you don’t pay back what you owe, it can ruin your relationships.
Pros
- No interest: Most friends or family members lend money without interest charges, which can make repayment more manageable and less financially burdensome.
- Flexible repayment terms: Loved ones are often more flexible with repayments, allowing for adjustments based on your financial situation.
- Instant access to funds: Your lender can quickly hand you the cash or send it via wire transfer.
Cons
- Strained relationships: If repayment becomes an issue, it can cause conflict.
- Lack of formal agreement: Unlike traditional loans, agreements with friends and family members might not be documented formally, which can lead to misunderstandings and disputes. Establish a clear repayment plan or schedule to mitigate risks. Even if it feels unnecessary, putting your agreement in writing can ensure both parties are on the same page.
2. Bank Loan
Traditional bank loans are one of the most common and reliable methods for borrowing money. Bank loans offer structured, long-term repayment plans that may come with lower interest rates than other borrowing options. You can apply for an unsecured or secured loan, but keep in mind that banks have stringent requirements and a longer approval process.
Pros
- Lower interest rates: Banks typically offer lower interest rates than credit cards or other lenders, especially if you have a good credit score.
- Fixed repayment plans: Bank loans have specific repayment schedules, which can help with budgeting and financial planning.
- Larger loan amounts: Banks can offer larger loan amounts than most money-borrowing options. They are the ideal lender for buying a home or funding a major project.
Cons
- Tedious approval process: Applying for a bank loan can be time-consuming. It involves extensive paperwork and verification steps. Some banks only need a day to process your application, while others may take up to a week or two.
- Strict credit requirements: Banks have strict credit score requirements, which can make it difficult for people with poor credit histories to qualify. Generally, 580 is the required credit score to secure a personal loan in many U.S. states.
- Fees and penalties: Additional fees may be charged for processing the loan, as well as penalties for late payments or early repayment.
3. Cash Advance from a Credit Card
Cash advances are a super quick and convenient way to get the money you need. But try to reserve this option for emergencies, as it often comes with high interest rates and fees.
A cash advance lets you withdraw cash using your credit card, either directly from your bank or through an ATM. Your credit card company limits the amount you can borrow to a percentage of your total credit limit.
Pros
- Immediate access to funds: The speed and ease of obtaining cash can be handy in urgent situations.
- Convenience: In many cases, cash advances are accessible via ATMs. There’s no need for additional applications or approvals.
Cons
- High interest rates: Cash advances typically carry higher interest than regular credit card purchases. The rates begin accruing immediately from the advance date without any grace period. It is also an expensive form of borrowing if not repaid promptly.
- Additional fees: Credit card issuers typically charge a fee for cash advances, usually a percentage of the amount withdrawn or a flat fee, whichever is higher.
- Impact on credit score: Using a large portion of your credit limit for an advance can harm your credit score by raising your credit utilization ratio.
- Limited amounts: Your credit card company may limit the amount you can withdraw to a small percentage of your total credit limit.
4. Loan Apps
Loan apps like LendingClub, MoneyLion, and Earnin are popular and convenient methods for borrowing money. These apps provide instant access to funds, often with minimal paperwork and rapid approval times.
Pros
- Fast approval: Trusted loan apps have streamlined application processes, with approvals and fund disbursements occurring within minutes or hours.
- User-friendly: Designed for ease of use, loan apps ensure a straightforward borrowing experience with intuitive interfaces and clear instructions.
- Accessible to lower credit scores: Many loan apps consider factors beyond credit scores, such as employment history and combined household income.
Cons
- Higher interest rates: Unlike conventional bank loans, cash loan apps may charge higher interest rates because they take on increased risk.
- Privacy concerns: Using a loan app requires sharing personal and financial information, which raises some privacy and security concerns. Choose a reputable app or company with robust security measures to protect your information.
- Limited loan amounts: Most loan apps offer smaller loan amounts than traditional banks, making them suitable for short-term or smaller financial needs.
5. Pawn Shops
Pawn shops have a unique and sometimes underutilized loan option. Using personal items as collateral allows you to acquire a loan without undergoing credit checks or dreary approval processes. However, while this method gives you immediate access to cash, it also comes with risks and limitations.
Pros
- No credit check: Pawn shop loans do not require a credit check, making them accessible to individuals with poor or no credit history.
- Quick cash: The process usually takes minutes from appraisal to cash in hand.
- Flexible terms: Many pawn shops allow partial payments to extend the loan period. This flexibility can be useful if you need additional time to secure the necessary funds.
Cons
- High interest rates: Pawn shop loans can have high interest rates and fees, making them expensive if not repaid on time.
- Risk of losing collateral: If you give up on the loan, you lose the item you pawned, which could be of significant personal or financial value.
- Limited loan amounts: Most pawn shops limit the loan amount to a percentage of the item’s appraised value, which may be less than what you need. To maximize the amount you can borrow, choose items that have high resale value and are in good condition.
6. Biltmore Loan and Jewelry
Biltmore Loan and Jewelry is a premier destination for upscale collateral lending and selling in Scottsdale, Arizona. We have over 30 years of combined expertise in the diamond and jewelry industry, as well as 20 years in antiques and luxury collectibles, bringing unparalleled knowledge and professionalism to the table. Our extensive experience and connections within the luxury and designer fashion industries ensure you receive top value for your items.
Pros
- Collateral loans: We provide loans against valuable items such as jewelry, designer bags, antiques, and collectibles. Our deep industry knowledge lets us appraise items accurately and offer competitive loan amounts.
- Direct sale: If you prefer to sell your luxury assets outright, we will gladly buy them from you. Click here for a guide to what we buy.
- Higher payouts: Our extensive network of buyers, collectors, and industry leaders allows us to offer more money for your items than many competitors.
- Same-day loan approval in Phoenix, AZ: Bring your items to our office for a professional appraisal, and you will receive a competitive loan offer or purchase price on the spot.
Biltmore Loan and Jewelry combines industry expertise with a customer-first approach, making us a leading choice for collateral lending and selling. Visit us to experience our commitment to excellence and discover why so many clients return for all their lending and selling needs.