By David Treehouse
If you are looking to raise some money for a specific reason, the usual course of action is to take out a bank loan. The process for getting bank loans isn’t complicated, but you will need to have assets in your name and a fairly good credit score to be able to obtain one. For those that can qualify for one, this is often the best way to get a loan to fund whatever project you have in mind. There are situations, however, where somebody will not qualify for a bank loan. In this case they will need to look for alternative methods to fund their project. Here are a few alternatives to getting a bank loan that you may want to consider.
You may want to try to borrow the money from either family or friends. The thing that you need to be extremely careful about is that you pay this money back. Taking out a loan from family and friends without paying it back can cause a huge rift in your personal relationships with these people. To show that you are serious, you should write up a contract and sign it so that they know that you are serious about paying it back. It also gives them confidence that if trouble comes up down the line, you will have to take responsibility for the loan that you took out from them.
Find a Cosigner
If you can’t qualify for bank loan on your own and your family and friends don’t have the money themselves to loan you, you might want to find somebody who has better credit who can cosign the loan for you. As with borrowing money from family and friends, the cosigner is ultimately responsible for the loan if you end up defaulting on it, so you want to be very careful before deciding to do something like this.
If you have credit cards, you may be able to fund your project through the credit cards. The obvious problem with this is that it’s a very high interest rate loan. The good part about it is that you are able to get the loan without any collateral. You need to think extremely hard about whether the ultimate interest rate you will be paying on the loan is worth what you need the money for. In most cases it’s not advisable to use credit cards as a way to pay for something you need in less you can pay off the credit cards immediately, but it can be an option when all others fail.
Peer to Peer Lending
There are a number of peer to peer lending websites on the Internet such as prosper and lendingclub. In this situation, you list what you need the money for, and people will decide the interest rate they are willing to lend the money to you for. This can often mean that you are able to receive the loan at a rate that is less than you would pay for using credit cards without having to put up assets for the loan. When you are not able to secure a bank loan on your own this is often the best option. More and more people are turning to peer to peer lending when they aren’t able to get a bank loan for what they need.
If the reason that you need the loan is for something that you can trade for rather than pay for, you should seriously consider making a trade. For example, if you need the money to pay for a repair on the roof, you may be able to trade the labor and cost of materials for some skill that you have in return. While this isn’t an option in all cases, it can work out to be mutually beneficial to both parties in many cases. It is, at the very least, worth considering
By using a bit of creativity, you should be able to find a number of alternative solutions to getting money that you need if you do not qualify for a standard bank loan. No matter what the situation, it isn’t going to be easy money, but there are definitely a number of different opportunities that you can use to find the funds that you need. Take the time to consider what the alternatives are and what will best suit your needs. By doing this, you should be able to find a way to fund whatever project you have in mind.