Can’t you qualify for a personal loan? 4 alternatives to try

Annie Millerbernd

Personal loans provide fast, unsecured funds that can pay for anything from home repairs to medical emergencies. Instead of asking for collateral like a house or a car, many lenders prefer applicants with strong credit and high incomes.

But what if you don’t meet a lender’s requirements? People who don’t qualify for a personal loan have alternatives to high-interest predatory lenders. These options can help bridge an income gap, but each has pros and cons.

1. Try the options without borrowing

See if you can find the money by making room in your budget and making some extra cash, says Tania Brown, a certified financial planner and financial coach in the Atlanta area. Review your budget for any expenses you can cut, even temporarily, such as dining out or streaming services.

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To save on existing bills, ask billing companies, creditors, or doctors’ offices if they offer interest-free payment plans, he says.

Finally, pair the reduced expenses with the extra income from a side gig like ridesharing or selling things you no longer need, Brown says.

2. Borrow from a family member

If you feel comfortable asking a family member for money, this may be one of your cheapest loan options. It doesn’t involve a credit check or credit report, but it may require additional planning.

Bring a “game plan” that includes a loan amount, interest rate, and repayment term when addressing the subject to take the guesswork out of the decision, Brown says. For a small loan, an informal loan document between you and the lender might suffice. Larger loans may require a formal agreement.

Ideally, an attorney will draft a formal loan document that you both sign, says Philip Mock, a CFP based in Tulsa, Oklahoma. You may have to pay a fee for attorney time.

Family loans can have tax implications, Mock says, so do your research when drafting your loan agreement. For larger loans or more complex questions, consult a tax professional.

3. Share a large purchase

A “buy now, pay later” payment plan can ease the stress of a large purchase by splitting it into multiple smaller payments. BNPL plans are available at most major retailers and can mitigate the financial blow of a new mattress or computer, for example.

Buy Now, Pay Later is a quick and easy option because there’s no rigid credit check or lengthy application process, says Kristian Brennon, an accredited financial advisor based in Kansas City, Missouri.

Since BNPL vendors automatically withdraw setup payments directly from your account, we recommend setting up payment due date reminders and making sure your account isn’t discovered.

4. Get a cash advance

Cash advance apps like Earnin and Dave provide a quick inflow of a few hundred dollars with no credit check and lower fees than paycheck advance loans. But like payday lenders, these apps require access to a user’s bank account to withdraw the refund on the next payday.

While affordable, cash advance apps should be used sparingly because they can be hard to budget, says Brown. The amount you borrow today will leave a hole of that size in your next paycheck, so you may want to anticipate that gap before you borrow.

“Make sure you get exactly the amount you need and have a plan on how to pay it back,” he says.

Build savings over time

Saving is the interest-free way to pay for emergencies and discretionary expenses. Mock recommends saving three to six months of expenses, but even having a few hundred dollars in savings will help cover most of the unexpected expenses.

If you need help building your savings each month, Brennon recommends finding professional help through the Association for Financial Advice and Planning Education. It offers free consulting services to the public until mid-December.

List your upcoming expenses, such as Halloween costumes and holiday gifts, and budget in advance, Brown says. This way, your savings can be reserved for unexpected expenses or income gaps.

“Life will always have ups and downs and the key is to learn how to manage it,” he says. “This helps to turn what would be a crisis into an annoying inconvenience.”

This article was written by NerdWallet and was originally published by The Associated Press.


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