9 Best Places to Get a Loan in 2021

 December 30, 2020
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There are times in life when you need to borrow money, whether to pay for your college education, buy a car or cover expenses until your next paycheck. But it’s not always easy to know where to get a loan.

Knowing who to turn to can help you make the best decision to suit your financial needs.

9 places to get a loan

If you’re looking to borrow money, there are a wide variety of institutions that may be able to help. Here are nine categories of lending options to consider, along with the pros (“why borrow”) and cons (“why skip”) of each:

1. National banks
2. Credit unions
3. Online fast-money lenders
4. Peer-to-peer (P2P) loans
5. Retirement plans
6. Cash advances
7. Private businesses
8. Payday lenders
9. Parents and friends

1. National banks

US Bank, Wells Fargo, Capital One — you’ve probably heard these names time and time again. In fact, you may already be a customer with one of these banks, making it even more attractive to borrow from a business you trust.

Your borrowing options aren’t limited to just these big banks, though. There are also some great online banks that offer nationwide service and access to a variety of loan products.

Why borrow: Big-name banks give you tons of options. From an array of terms (length), fees, incentives and more, you’ll likely find a loan that works for you. In addition, brand-name banks are also set up for convenient features such as online bill pay and may have 24/7 customer service to assist you.

Why skip: A big name doesn’t mean big service. Working with national banks could make it difficult to get a real person on the phone, or you might end up talking to an inexperienced bank agent.

These people may also not have the flexibility to grant exceptions or are required to follow strict rules about credit scores and borrower profiles. You might find it harder to get a personal loan when you have fair to poor credit.

2. Credit unions

Credit unions are becoming a popular alternative to banks. Credit unions are usually headquartered within the community they serve, and borrowing from them can be a great way to support local businesses and get some small-business benefits.

Why borrow: On average, credit unions offer borrowers lower rates than banks. Another huge plus is location. Instead of having to call when there’s a question, you can always stop by your branch to sit down face-to-face with an expert.

Many borrowers like the personal touch of a credit union — including some degree of flexibility when making loans.

Why skip: Want to pay online or check your payoff progress? It may not be an option with credit unions, as some are behind the technology curve. Additionally, there might be limits to products and services offered by smaller credit unions. Make sure your local credit union has what you need.

3. Online fast-money lenders

Want to get a loan in your pajamas? You can get a loan fast with an online lender — sometimes seeing the money in your account the very next business day. However, there is much to be cautious about before taking the money.

Why borrow: It’s fast, easy and you don’t need to do much more than put in your information and wait for approval. It’s also a good alternative if you have poor credit, as many of these lenders are set up to work with bad or no credit.

Why skip: Some of these banks may charge crazy-high interest rates. In some cases, you could find yourself paying 400.00% APR — or more. Once you’re in that cycle, it can be hard to break out, and the fees and costs just keep piling up. In many cases, you’re better off exhausting other options first.

4. Peer-to-peer (P2P) loans

One type of online lender that is making a name for itself is peer-to-peer lending. You apply for a loan and individuals, not banks, fund part or all of it. You pay interest and the balance back to them.

Why borrow: Rates for P2P loans are usually very reasonable and are attractive for a host of different borrowers. Terms usually range from three to five years, making it a great choice if you are looking for a loan you can pay off quickly and painlessly.

Companies like Lending Club are making it easier than ever to find funding when traditional banks won’t take you.

Why skip: Even though P2P lenders claim that they help people traditional banks shun, the reality is that they still have a credit underwriting system. You might end up with a high interest rate. Additionally, in some cases, if not enough people decide to help you by funding your loan, you could end up getting none of the money and then you’re back to square one.

5. Retirement plans

Have an employee-sponsored retirement plan? You may be eligible to take a loan out on your retirement savings. The IRS has limits on how much you borrow ($50,000 or half the balance, whichever is less), but it could be a good source of quick cash if you’re careful.

Why borrow: It’s technically already your money, and when you pay it back (usually within five years), you pay back interest to yourself. Interest rates are competitive and these loans are a good alternative if you can’t obtain a loan because of credit issues.

Why skip: It’s your retirement, and by removing some funds from your account, even temporarily, you won’t benefit from compound growth. That could set you back years from your retirement goal.

6. Cash advances

Let’s say you need your loan to handle an emergency that requires access to cash ASAP. In that case, you can take your credit card to the ATM, request a cash advance and in seconds have access to real money.

Why borrow: It’s an efficient method to get cash when it’s the only thing that will do.

Why skip: In most cases, your interest rate on a cash advance is higher than your purchase rate. On top of that, you might be charged an additional fee. This can make the whole thing more expensive. However, it can still be cheaper than getting an online fast-money loan.

7. Private businesses

Need a new couch or a car but don’t feel like taking time to go through the process at the bank? Today, businesses that sell big-ticket items can provide you with a loan for the purchase.

Car dealerships are prime examples, but many other retailers offer financing as well. Think furniture stores and big-box stores that offer credit cards or other financing deals when you buy TVs, lawnmowers and computers.

Why borrow: You’re already purchasing from them, so save the effort and get the loan or instant credit card on site. These lenders may also offer discounts on the price or no interest for extended periods of time if you qualify.

Why skip: Shopping around for loans may show you that the effort is really worth it. Because these businesses are the middle man, you don’t get to see the competitor’s rates and terms. You might be able to get a better deal elsewhere. In addition, the person you’re dealing with is most likely not a loan expert, but a salesperson.

8. Payday lenders

Having limited credit history can mean your options are especially tight. When emergencies come up, you may be put in a desperate position. That’s where payday lenders come in. Using a cash advance on your pay stub, you can get a short-term loan for instant cash.

Why borrow: Limited options and serious emergencies requiring small amounts of money (usually under $1,000) are usually the only reasons why you should consider payday lenders. And, even then, think twice.

Why skip: Where payday lenders get you is in the outrageous fees and interest charged. The average loan term is two weeks with a 400% APR or more (paid in one lump sum at the end). Even small loans of only a few hundred dollars can add up to impossible amounts once large fees are tacked on.

9. Parents and friends

You may not be interested in calling in a loan from Bank of Mom and Dad, but for those who are in a jam, asking generous friends and family can be a solution with limited financial consequences.

Why borrow: Loans from someone you know are ones that are written, documented, and charge some interest (even if it’s only half a percentage point). This protects both sides from potential misunderstandings, in addition to creating a more official, business feel to the deal.

Why skip: Family, friends and money don’t mix — and for good reason. Failing to pay back loans can lead to resentment from a parent or friend, causing major drama that could hurt your relationships.

Loan choices that work for you

We’ve all been there: the bills need to be paid and you need cash fast.

Luckily, with the variety of options out there, you can find the best places to get a loan that fits your needs.

When loan shopping, be sure to come prepared and ready to look for red flags such as high borrowing fees, large interest rates and inflexibility by the lender.

By investigating your best place to get a loan when you need money, you can reduce what you pay overall and avoid getting taken advantage of.

Rebecca Safier and Michelle Argento contributed to this story.