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If a personal loan won’t work, here are three alternatives.
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It’s easier to get a personal loan with a good credit score, but there are many ways to borrow cash.
A credit card, a payday alternative loan, or borrowing from family or friends are options as well.
However, credit cards can have high interest rates, and getting loans from family can be risky.
If you’re trying to make ends meet, a personal loan might not be an option.
A personal loan is not always easy to get. They’re often only available to those with the best credit scores and good credit history and they’re unsecured, meaning that there’s no collateral available for banks to use to recoup money if you stop paying. If you have a poor credit score or a high debt-to-income ratio, you might find it hard to get a loan.
However, you’re still able to get a loan with no credit, as some lenders consider other factors outside of your credit score when making a lending decision.
Read more about our picks for the best personal loans »
That’s not to say they’re completely off the table. Consider shopping around with a few different lenders before deciding that a personal loan won’t work, and dip into emergency savings before getting a loan. If you’ve searched around for a personal loan to cover your debts and can’t find one for you, here are three alternative options:
1. Payday alternative loan from a credit union
Payday loans aren’t good for borrowers. They often have incredibly high interest rates — the typical payday loan has an interest rate of over 400%, according to the Consumer Financial Protection Bureau.
Payday alternative loans, however, are a better option for a small loan. Offered through credit unions, these loans have a maximum interest rate of 28%, lower than some personal loan options. The amount available generally ranges from $200 to $1,000. Payday alternative loans have application fees capped at $20, and loan terms between one and six months, according to the National Credit Union Administration.
These alternative loans are an option for anyone who needs a small amount of cash quickly. While they’re only available to credit union members, joining a credit union — which often has membership requirements, like residence in a certain area — is usually very accessible These loans are regulated by the National Credit Union Administration, and are meant to help consumers avoid predatory lending practices at payday lenders.
2. A credit card
In typical circumstances, the best way to use a credit card is like a debit card: to spend only money you have, so you’re never accumulating debt. However, if you really need cash immediately, credit cards allow you to borrow money in small amounts at a time, and then pay it back. Know that they will be an even more expensive option than personal loans if you end up carrying a balance — your balance will accrue interest each month, and that interest compounds as well.
The average credit card has an interest rate of 18.43%, according to data from the Federal Reserve. It’s worth noting that a credit card’s interest rate offered varies based on several factors, including a person’s credit history. Interest rates can also change independently based on the prime rate that banks are charged to borrow.
If you do decide to cover expenses with a credit card, look for a card with the lowest possible APR — the lowest cost for borrowing. Ideally, you should pay off your balance in full each month. If you know you won’t be able to do that, consider a card with a 0% introductory APR, which won’t charge interest for an introductory period (but will resume charging interest once that period is up). We keep track of the best 0% APR credit cards at any given time.
3. Borrow from family or friends
This option can be tricky, but it could be an option for anyone who has friends or family members willing to float them a loan. Borrowing from family or friends should really be a last resort, writes Luke Landes, a personal finance blogger and author at Consumerism Commentary. And, this option doesn’t come without risks — it could hurt relationships, writes Catherine Fredman for Consumer Reports.
There are some rules for taking this approach the right way. Financial planner Mary Beth Storjohann suggests making a written plan.
“Put the parameters in place — time frame, interest rate, and when payments need to start,” she says. Storjohann suggests charging interest on the loans to help hold the borrower accountable, and make a small incentive for the lender.
Next Step: Check for prequalified loan offers without impacting your credit score.
Frequently asked questions
What can I do if I can’t get a loan?
If you can’t get a loan, consider other options for fast cash. Ask your family and friends for money, reach out to a local nonprofit, or consider picking up work in the gig economy.
What type of alternative loans is the most popular?
Payday loans are one of the most popular forms of alternative loans — but be extremely cautious before taking them out. The typical payday loan has an interest rate of over 400%, according to the Consumer Financial Protection Bureau.
Why can’t I get a loan?
You may not be able to get a loan because your credit score isn’t in the best shape or because other aspects of your financial situation aren’t permissible to the lender. Luckily, you can fix those things with time.
How do you get a loan when nobody will give you one?
Work to improve your credit score by paying your bills on time and in full. You may also try enlisting a cosigner with better credit to help you get a loan.