If you have a major purchase on the horizon, such as a new car or home renovations, the chances are you’ll need to borrow money to cover at least some of the cost. With most young people having little to no personal savings to cover thesebig expenses, sourcing alternative finance is the only option.
Times have changed a little from the days when your only option was to head to your local bank to borrow money. There are now a range of alternative ways to get a loan, and the major banks are having to step up their game to compete.
Here we’ll look at a few ways you can borrow money – some traditional, some a bit less so.
Very much the tried and tested way of funding a major purchase, a personal loan from an established lender is one of the most straightforward ways of borrowing. Interest rates tend to be fairly low (depending on how much you borrow), and you may find it easier to get finance from a bank that you’ve used regularly in the past.
There are various tools for comparing the rates available from the major banks in your country, so you can shop around and try to get the best rate fairly easily online.
Peer to Peer Loans
An emerging market which looks to be a real threat to traditional lending, peer to peer loans involve other people loaning you the money instead of the banks themselves. Your risk level is calculated by a middle man, and investors are offered a return on their money for providing you with the loan.
It’s very much in the early stages, but it’s an interesting way of either borrowing money or, if you’re on the other side, investing. There’s always a risk with investing in peer to peer loans, but investors can usually set their risk tolerance to suit their investment style.
If you have a good credit score it’s possible to pick up a credit card with a fairly low APR, with some even offering 0% on new purchases for the first year. The value of this approach really depends on what you’re being offered, as those with a poor or nonexistent credit history will probably struggle to get a decent rate.
If you take out a card with 0% on new purchases but you find you’re struggling to clear the balance within the year, another option would be to take out a 0% balance transfer card towards the end of the year and move the money across. Again, the credit offered to you will depend on your circumstances so it may not be a viable option for everyone.
In the UK, many local areas have their own credit unions, who can provide a range of small loans for a fairly low interest rate. There will be a limit on how much you can borrow, and you will normally need to have some savings with them before they will consider your application, but it’s a great alternative if you’re only looking for a small loan.
There are a range of other financing options out there, and while some are higher risk than others there’s usually a way of pulling together the money you need. Take advantage of the internet to shop around for the right deal for you, as it’s easier than ever to find the right lender.