Written by Anna Yen
In Cash Advance
On July 6, 2023
A Guide to Accessing Funds When You Need Them
Cleo's resident financial advisor, Anna Yen, answers all your FAQs about accessing quick cash.
Borrowing money can pave the path to graduation, fund your business ambitions, or float you through tough times. Today, it’s easy to access funds from a variety of sources to finance almost any need.
The trick? Selecting a lender and loan that suits your situation.
Traditional banks
When you think of borrowing money, banks probably spring to mind first.
Banks fund a variety of loans designed for common needs like buying a home, personal use, or business use. Most also refinance existing loans into new debts with better rates or more flexibility. But be warned: many don’t cater to credit scores below 670 or so.
Funding options
Auto loans
Mortgages
Home equity lines of credit
Personal lines of credit
Personal loans
Private student loans
Business loans
Pros
Easy to access
Existing customers may receive APR discounts
Brick-and-mortar customer service experience available
Cons
Often have higher application and servicing fees
May sell loans to other financial firms
Many don’t serve poor credit borrowers
Credit unions
Credit unions are generally non-profit financial institutions – similar to banks – that impose membership requirements. Since most have lower overhead, they’re known for lower-rate, lower-fee funding and offer some of the best APRs for personal loans. They may also accept credit scores that traditional banks would turn away.
Funding options
Auto loans
Mortgages
Home equity lines of credit
Personal lines of credit
Personal loans
Credit builder loans
Private student loans
Business loans
Pros
Lower fees and APRs
Existing customers may receive APR discounts
Better approval odds
Cons
May have fewer loan options
May have membership requirements
Typically regional
Online-only lenders
“Online lender” is a broad term that refers to internet-based financiers like Rocket Mortgage, Ally Bank, and “financial tech” lender Avant. They boast fast applications, quick funding, and the convenience of applying in your underwear.
Exact terms and costs vary by lender and loan purpose, but their lower overhead may translate to bigger savings. However, you’ll want to avoid predatory and “bad credit” lenders that jack up their rates.
Funding options
Mortgages
Auto loans
Personal loans
Private student loans
Credit builder loans
Business loans
Pros
Fast application and funding
Bad credit borrowers may qualify
Potentially lower-cost
Cons
No in-person customer service
Predatory lenders may charge higher rates
Less room for negotiation
Public agencies
Various U.S. government or government-sponsored agencies fund accessible business and personal loans. Think Fannie Mae, the FHA, and the VA for affordable mortgages, or the SBA for business loans.
Often, government loans set looser credit requirements, extended terms, and more favorable APRs. However, you may do more paperwork, and many loans restrict money borrowing by income or assets.
Funding options
Housing assistance
Home renovations/upgrades
Student loans
Business loans
Pros
Better rates than private lenders
Wide variety available
Poor credit borrowers may qualify
Cons
May have to meet income/asset requirements
Longer applications
Often impose eligibility criteria (veteran or low-income status, etc.)
Credit cards
Credit card issuers extend revolving credit lines you can re-borrow from repeatedly. You can access funds in two ways:
Using your card charges your regular APR, but you may avoid interest by paying off your balance monthly. Some cards offer 0% intro APR periods, which makes money borrowing free if you repay your balance.
Cash advances provide instant cash, but your sky-high interest rate starts accruing immediately. Most lenders also limit cash advances to a percentage of your credit line.
Funding options
Revolving credit line
Cash advances
Pros
No application fees
Paying in full negates interest charges
Good borrowing habits build your credit score
Cons
Higher interest rates
0% intro APR benefits expire
High balances hurt your credit score
Cash advance apps
Many financial services – Cleo included – offer affordable cash advances. These are smaller spots, usually $50 to $500, that you repay from your upcoming paycheck. Many waive interest charges entirely, though you may pay a subscription fee to access funds.
At Cleo, you could get a spot of up to $250 with no interest, no credit checks, and no minimum direct deposit required. Plus, our money app roasts you into building a better budget, so needing money may be less common in your future.
Funding options
Cash advance loans
Pros
Quick and easy funding
No or low interest
Small, affordable amounts
Cons
Some subscriptions amount to high APRs
Amounts typically limited to $500 or less
Typically must be repaid from your next paycheck
Buy now, pay later (BNPL) services
Buy now, pay later services fund (typically online) purchases at checkout. You usually put around 25% of the cost down, then repay the rest in installments over 1-6 months. Most BNPL loans don’t charge interest or fees, though those that do may set high rates.
Funding options
No-interest loans
Item- or purchase-specific loans
Pros
May not charge interest or fees
Short-term funding
May waive credit checks
Cons
Easy to overspend
Some charge high APRs
No long-term loans
Retailers choose BNPL partners
Peer-to-peer (P2P) lenders
Peer-to-peer lending is a newer money borrowing model where individuals borrow from other individuals. Borrowers can use P2P platforms to apply for almost any kind of financing. Then, individual investors can fund loan requests at an agreed-upon rate. The downside: borrowers may receive only partial funding or owe money to multiple people.
Funding options
Mortgage-related loans
Personal loans
Private student loans
Business loans
Investment loans
Pros
Accessible to poor credit borrowers
May receive lower interest rates
More lending options
Cons
No in-person customer service
Not available everywhere
Fees and interest rates may vary
May owe money to multiple lenders
Finance companies
Finance companies fund short-term loans for specific purchases and businesses, like Toyota, Ashley Furniture, or Samsung. Many offer competitive rates and no application fees, but credit and income checks are required. Additionally, finance companies are licensed and regulated at the state level and aren’t subject to federal oversight.
Funding options
Item-specific personal loans
Auto loans
Business loans
Pros
Fast application
Same-day funding
Competitive rates and fees
Traditional and non-traditional lending networks
Cons
Less regulated
May charge predatory rates to poor credit borrowers
Loans are secured against the financed item
Inflexible terms
401(k) loans
Some retirement accounts, like 401(k)s and 457s, allow employees to take tax-free loans against their retirement. The IRS limits these loans to 50% of your retirement (up to $50,000), and requires repayment within five years.
Borrowing money this way means that any “interest” pays into your own account. However, the IRS may reclassify your loan as a distribution and charge taxes and penalties if you don’t repay on time.
Funding options
Personal loans
Pros
No fees
Pay interest to yourself
No credit impact
Cons
IRS imposes borrowing limitations
Non-payment can incur taxes and penalties
Loss of tax-advantaged growth for retirement
Leaving your job may trigger immediate repayment
Margin account loans
Investors may be able to tap their margin accounts for quick loans. While these loans are designed to purchase investments, some brokerages permit personal loans, too. Many boast low interest rates, though your loan amount is limited by your assets. And if the market drops, you may have to deposit more collateral or sell your investments.
Funding options
Investment loans
Short-term personal loans
Pros
Borrow against your equity
Low interest rates
No additional fees
Can pay in cash or by selling securities
Cons
Market fluctuations impact repayment requirements
May have to sell assets prematurely
Interest rates may fluctuate
Pawnshop loans
Pawnshops fund secured loans against items like instruments, antiques, jewelry, and electronics. This method of money borrowing is quick if you have valuables lying around the house. However, if you don’t repay your loan by the deadline (usually a month), you’ll have “sold” your property for less than its full value.
Funding options
Secured short-term loans
Pros
Access to fast cash
No approval process
Doesn’t hurt your credit score
Cons
Fees and interest add up
May charge extra for appraisal, storage, and insurance
Short-term loans only
May “sell” item for a fraction of its value
Family and friends loans
Sometimes, you just need a little help from your “village” to get by.
Family and friend loans cut out the formalities of a traditional loan and can be great if you have poor or no credit. However, you risk ruining your close relationships if you can’t or don’t repay your loan.
If you go this route, be sure to put your agreement on paper to make it official.
Funding options
Personal loans
Pros
No formal application/approval process
No harm to credit
Can negotiate repayment and interest informally
Cons
Can ruin close relationships
Not using a contract can lead to repayment arguments
Borrowing money can get you through a tight spot
Borrowing money isn’t always ideal, but it’s possible to leverage loans into bettering your future and financial standing. No matter which way you decide to access your funds, be sure to shop around for the best rates and terms possible. And don’t forget to make your payments on time and in full so you can build your credit score.
Want a little help making the whole money thing less scary? Download Cleo for free to access your personalized budget.
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*Eligibility requirements apply. Not all users will qualify. Advance amounts range from $20 to $250. Same day transfers subject to express fees. Visit meetcleo.com/terms for more information.