3 lending alternatives to the traditional personal loan

When you’re short on funds, a personal loan is an obvious answer. But it isn’t always the easiest. For a growing number of underserved individuals, it can be downright impossible!

If your latest application for a loan was denied, don’t panic. Mainstream banks aren’t the only source of personal loans. Here are three loan alternatives to the ones issued by the bank.

  1. People You Know


Credit: lilcrazyfuzzy

Family, friends, and even co-workers may be able to help you when you’re low on funds and the bank says no. As many as 88 million Americans turn to people they know for loans every year.

In some ways, borrowing from friends and family is easier than traditional options. Your cousin or BFF are just people. The chances they have strict lending policies in place is highly unlikely.

They probably won’t check your credit score or review your finances before they agree to lend you cash. Your loan will also lack the typical lending fees and other charges that are usually a part borrowing.

Without interest and other fees, this type of credit is cheap. You only have to pay back what you borrow.

That isn’t to say borrowing from friends and family is without its fair share of challenges. It can make things very difficult in other ways.

Without clear terms and conditions, things can go wrong. Like, if you think you have until the end of July to repay the loan when they expect their money at the beginning of it.

How do you avoid ruining your relationship?

This awkward misunderstanding can do irreparable damage to your relationship. Guilt and resentment can destroy any trust you had in each other.

But that’s the worst-case scenario. To avoid ruining your friendship, you’ll have to work extra hard to communicate. Some things you’ll want to make explicit include:

  • Whether you’ll pay them back in one lump sum or in multiple payments
  • When you’ll pay them back
  • How you’ll send them the money

When in doubt, get this information down in writing. You don’t have to sign and notarize it. Even a shared Google doc outlining everything can help.

  1. Online Installment Loans Direct Lenders

Some people would rather walk across hot coals before they ask a loved one for help. Others may not have friends and family who can help. They’re in the same boat, facing bills and shrinking savings.

When borrowing from people you know isn’t an option, online installment loans direct lenders are a great option. Online installment loans direct lenders are a quick and convenient way to get loans online.

More importantly, these lenders don’t value credit scores in the same way as mainstream banks. While online installment loans direct lenders will look at your score when you apply, they won’t necessarily turn you away if you have a subprime score. They use other ways to determine if you’re creditworthy.

How do online installment loans direct lenders work?

With online in the name, it may not come as a surprise that you’ll do everything over the Internet — from sending off an application to repaying your installment loan. Some lenders have apps that make reviewing your account even easier.

This online process means you’ll spend less time than if you had applied with a bank. Online installment loans direct lenders don’t have brick-and-mortar locations, so you don’t have to wait until opening hours or take time out of your day to get to a branch.

Online installment loans also lack much of the red tape that complicates in-branch loans. This will come as a relief if you need to get cash fast this spring for an emergency.

  1. Crowdfunding Services

Another online option for the underserved is through crowdfunding services. These websites and apps rely on people donating towards a cause. Some popular services include:

  • Kickstarter
  • GoFundMe
  • Indiegogo
  • Ulule

Even if you haven’t heard of these services, you may have heard of their more successful campaigns. Perhaps the most famous examples are the Pebble Watch and the Exploding Kittens card games. The companies behind these products used the crowdfunding website Kickstarter to raise capital for their businesses.

Kickstarter, GoFundMe, and other services aren’t just for businesses. Individuals, groups, and charities use these websites to raise money to do almost anything. In an emergency, you can create a campaign to help pay for an unexpected vet bill or prescription.

How do crowdfunding services work?

Crowdfunding works a little differently from the other options, as it isn’t a loan. Most people don’t expect to get any money back when they donate to your campaign.

Of course, there are some exceptions, like businesses that offer services or items to donors who give enough money. For example, the Exploding Kittens campaign gave a deck of cards to anyone who pledged $20 USD or more to their cause.

Most crowdfunding services will also take a percentage of the money you raise over the course of your campaign. It may be as much 10 percent, depending on the site you use and whether you meet your fundraising goal.

With the service skimming a little from every donation, it can be hard to raise enough money for your bills.

The trick is making a campaign that’s easy to share. Online visibility is the key to raising enough money. If people share your cause across Facebook and Twitter, more people will see it, share it, and possibly donate.

Bottom Line? There Are Other Options

Getting denied a loan can be frustrating, but it isn’t unique. A little more than three-thirds of all Americans are denied a personal loan.

Luckily, there are alternative ways to get the money you need in an emergency. If a mainstream bank denies you cash, try friends, online lenders, or crowdfunding instead.

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