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Strategies to Save

99% of Savings Accounts Don’t Beat Inflation: Here Are Some With Higher Rates

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

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Inflation — or the increase in prices and the decrease in the purchasing power of money — is an economic concept commonly discussed in the news and among most adults as it affects cost of living, finances and savings. Right now, the inflation rate is 2.3% annually and has been over 2% for more than a year, according to the Consumer Price Index (CPI).

In comparison, the average savings account rate is still only 0.26% for nearly 9,000 savings accounts at banks and credit unions across the U.S. For certificates of deposit (CDs), the news is a little better. The average rate is 1.04% (for a one-year CD) among nearly 7,000 banks and credit unions.

While savings account and CD rates are finally starting to increase, very few banks and credit unions offer rates that will outperform the rate of inflation. In a new study, MagnifyMoney sifted through more than 15,000 personal savings accounts and one-year CDs to see where one could earn enough on their savings to keep up with the rate of inflation of 2.3%. Overall, the results were disappointing.

Key findings

  • The average savings account rate is only 0.26%.
  • The average one-year CD rate is only 1.04%.
  • Only 0.4% of the nearly 9,000 savings accounts reviewed last month offered an annual percentage yield (APY) greater than the inflation rate of 2.3%. Often, that savings account rate was capped at the first $500 to $5,000 on deposits.
  • Only 3.4% of one-year CDs were yielding 2.3% or more in November 2018.
  • Credit unions and online banks make up most, though not all, of the savings accounts and CDs that outpace inflation.
  • Some of the best rates are offered by credit unions, for which membership for many may not be possible.
  • Half of the savings accounts reviewed yield 0.15% or less annually.
  • Half of the one-year CDs reviewed yielded 1.00% or less annually.
  • Even though some of the one-year CDs reviewed are offering yields greater than the inflation rate of 2.3%, many interest rate observers expect inflation to increase even faster in the months ahead, meaning that inflation may still get the better of these deposits.

Breaking down the data

Let’s look at some data visualizations that highlight some of the key findings of this study. These three charts below will show you:

  1. The distribution of CDs with the best rates by financial institution (i.e., brick-and-mortar banks, online banks, credit unions)
  2. Distribution of 366 savings account yields
  3. Distribution of 396 one-year CD APYs

Check out this chart that shows which CDs beat inflation by financial institution type. Only 14 brick-and-mortar banks offer rates that compete with the current inflation rate.

This chart displays the distribution of savings account yields as of October 2018. Only seven savings accounts surveyed offer 2.3% or more.

You can see the distribution of one-year CD APYs across 396 CDs in the chart below.

Why many savings accounts and CDs aren’t outpacing inflation

Now that we’ve looked at the data and seen the statistics on savings account and CD rates compared to the inflation rate, let’s discuss two reasons why many savings accounts and CDs are not outpacing inflation.

Big banks play on convenience

Brick-and-mortar banks often compete over convenience, rather than on deposit rates. The price of offering a branch or ATM in as convenient a location as a Starbucks may be more affordable than offering better rates. When a bank snags new business because it’s a convenient option, customers may be less inclined to leave for a better rate.

The largest banks, which represent the largest share of low rate deposits, also have an interest in getting funds into their brokerage and investment accounts, rather than high-yield deposit accounts. In a brokerage account, the bank can earn money on trading commissions and fees on funds.

Online banks, regional banks and credit unions looking to compete with larger banks can’t win when it comes to the number of branches and locations they offer. Often, they don’t have a brokerage arm either. So they compete for new customers by offering attractive rates on deposits.

Inflation rates are increasing faster than interest

If the interest paid on your savings account does not keep up with the rate of inflation, the purchasing power of your savings will decrease over time. For example, if you buy a one-year, short-term CD at 2.5% but inflation increases from 2.3% to 4% within the year, there is no way for your investment to keep up — even with a higher earning rate.

6 standout banks with a high-rate savings or CD account

Putting your money in a savings account or a CD is almost always a better option than keeping your money at home. Savings accounts offer more flexibility and allow you to withdraw your money frequently with limited penalties. A CD often offers higher interest rates but limits access to your funds until the CD term expires.

Based on the data and findings from the MagnifyMoney study, where can one go to get savings account or CD rates that beat inflation? While the majority of banks and credit unions are not offering high-rate savings or CD accounts, here some financial institutions that stand out.

Savings account options that outperform inflation

If you are looking for a savings account that offers a high yield and flexible access to your money, here are options that may be right for you. Just be aware that income from bank accounts is taxable, so even if the headline rate is above inflation, your net return may be below inflation depending on your tax situation.

Vio Bank

The High Yield Online Savings Account from Vio Bank carries a 1.75% APY for all balances. It takes just $100 to open this account and there’s no monthly fee, making Vio Bank an accessible and low-cost option to earn a savings rate this high.

CIT Bank

Another high-yield account to consider is CIT Bank’s Savings Builder account. It offers a 1.75% APY on a tiered basis — savers can earn this high rate by either maintaining a balance of $25,000 or higher or depositing $100 or more into the account each month. It takes just $100 to open a Savings Builder account, and it has no maintenance fee.

Popular Direct

One of the highest savings rates we could find is offered by Popular Direct, the online arm of Popular Bank. It offers a 2.55% APY on its Plus Savings Account, and interest compounds daily. You’ll need to deposit a minimum of $5,000 to open this account, and maintain a balance of $500 or more to get the $4 monthly service fee waived if you.

CDs options that outperform inflation

If you are looking to save your money in a CD and can agree to the terms, these three banks or credit unions are offering rates that outperform inflation.

PenFed Credit Union

For a one-year CD, PenFed Credit Union offers a 1.15% APY and requires just $1,000 to open a CD. This rate outperforms the inflation rate (2.3%) significantly.

Live Oak Bank

Next is another bank with high-rate CDs, Live Oak Bank. Its 12-month CD comes with an APY of 1.90% and requires a minimum opening deposit of $2,500.

Greenwood Credit Union

Greenwood Credit Union is offering a 12-month CD term with a 1.00% APY. The minimum opening deposit is $1,000.

Let’s look at a real-world example. If you were to deposit $10,000 in a one-year CD at Greenwood Credit Union with a 3.00% APY, you’d earn $300 after 12 months.

Based on the results of this study, there are very few (.4%) brick-and-mortar banks, online banks and credit unions that offer high-yield rates on savings accounts and CDs. In most cases, the inflation rate of 2.3% is higher than interest rates being offered. Based on the last year, the inflation rate has stayed above 2%, while savings account rates average only 0.26% and one-year CD rates average 1.04%, according to the MagnifyMoney study.

Still, some financial institutions offer rates that outperform the inflation rate. Check out all your options using the MagnifyMoney savings accounts marketplace. You can also check out some credit unions and online banks that offer high-yield rates for one-year CDs using MagnifyMoney’s CD rates comparison tool.

Methodology

MagnifyMoney surveyed roughly 9,000 personal savings accounts and 6,000 one-year CDs of banks and credit unions available in the U.S. to determine the percentage of products with annual percentage rates that are greater than that of inflation, as measured by the September 2018 Consumer Price Index annualized rate of 2.3%. Banks were surveyed Oct. 30, 2018.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

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Pay Down My Debt

6 Ways to Managing Money in Your 20s

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

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Life as a young 20-something-year-old is an exciting time. You’ve likely graduated from college, started your first real-world job, and are making decisions on your own. While your adult life has just begun and retirement seems years away, it’s important to start discussing your financial options, managing your money responsibly, and planning for your future now.

This article will walk you through six suggestions on how to manage money in your 20s.

1. Create a budget

Budgeting is the process of tracking your income, bills and expenses in order to assess how much you can spend and what you can afford each month. Creating a budget and sticking to it is the foundation for financial success as it helps you to live within your means and avoid debt.

“The first thing I recommend to most young people starting out is to understand a budget,” said Corbin Green, a growth and development director and financial advisor based in Salt Lake City. “People need to understand what money is coming in and what money is going out each month, and have it laid out in an organized fashion.”

When creating a budget, you’ll want to write down:

  • Your income: How much are you making each pay period?
  • Your expenses and recurring payments: What does your rent/mortgage, utilities, groceries and gas add up to each month?
  • Debts owed: How much do you owe for student loans, car payment, credit card debt?

Once you’ve assessed your income and expenses, you can make your budget.

2. Pay yourself first

Once you’ve outlined your initial expenses, such as your mortgage, car payment and utilities, it’s crucial to add an “expense” of paying yourself first to start building up a short-term and long-term savings account. Treat your savings and retirement account like a utility bill — it must be paid monthly and on time.

“My recommendation is to pay yourself first. The first bill paid each month should be money to your savings account, then your essential bills and anything left over at the end of the month is fun money,” Green said. “The biggest mistake I see is the younger generations make is not saving early enough. They tend to have a ‘kick the can down the road’ attitude and put off savings until their 30s.”

Let’s look at an example: Assuming you want to have $1 million in savings by the time you retire at age 65, this is how much you’ll need to invest each month:

Monthly savings to reach $1 million by age 65

Starting age

Monthly savings required

25

$381

35

$820

45

$1,920

“This generation lives lavishly, so the number we coach people to save is around 20% of their income. That should help them maintain their current lifestyle in retirement,” Green said. “If you want more travel and more fun stuff during retirement, saving 30% of your income will help you live a lifestyle above what you’re currently living.”

Time is on your side when you’re young. A little bit of money saved now is going to make a big difference later. Make your savings payments consistent, sustainable and automatic.

3. Start an emergency fund

In addition to your retirement account, you’ll want to start an emergency fund. An emergency account is money set aside specifically to cover the cost of an unexpected expense. This account usually consists of three to nine months’ worth of money that is easily accessible in case of an emergency.

If something unexpected were to happen (i.e., inability to work, illness, loss of income), you’d have quick access to cash that would sustain you long enough to pay your bills and allow you to find a qualified job.

4. Pay off existing debt

The average millennial has an average of $23,064 in debt, according to a recent study by LendingTree, the parent company of MagnifyMoney. Debt — or money owed to a lender — can be crippling to your financial, and even your physical and mental health.

Large amounts of debt can seem daunting to pay off, but it’s important to make a plan, start paying it off quickly and include it in your budget as a monthly payment. If you have more than one debt, how do you know which to pay off first?

Green suggests consolidating debt to one payment with a lower interest rate when possible. You may find and compare debt consolidation loans you can use to consolidate debt using this tool from LendingTree. You’ll input some personal information before getting to review loan offers from up to five different lenders based on your creditworthiness.

LendingTree
APR

As low as 3.49%

Credit Req.

Minimum 500 FICO®

Terms

24 to 60

months

Origination Fee

Varies

SEE OFFERS Secured

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LendingTree is our parent company. LendingTree is unique in that you may be able to compare up to five personal loan offers within minutes. Everything is done online and you may be pre-qualified by lenders without impacting your credit score. LendingTree is not a lender.


A Personal Loan can offer funds relatively quickly once you qualify you could have your funds within a few days to a week. A loan can be fixed for a term and rate or variable with fluctuating amount due and rate assessed, be sure to speak with your loan officer about the actual term and rate you may qualify for based on your credit history and ability to repay the loan. A personal loan can assist in paying off high-interest rate balances with one fixed term payment, so it is important that you try to obtain a fixed term and rate if your goal is to reduce your debt. Some lenders may require that you have an account with them already and for a prescribed period of time in order to qualify for better rates on their personal loan products. Lenders may charge an origination fee generally around 1% of the amount sought. Be sure to ask about all fees, costs and terms associated with each loan product. Loan amounts of $1,000 up to $50,000 are available through participating lenders; however, your state, credit history, credit score, personal financial situation, and lender underwriting criteria can impact the amount, fees, terms and rates offered. Ask your loan officer for details.

As of 17-May-19, LendingTree Personal Loan consumers were seeing match rates as low as 3.49% (3.49% APR) on a $10,000 loan amount for a term of three (3) years. Rates and APRs were based on a self-identified credit score of 700 or higher, zero down payment, origination fees of $0 to $100 (depending on loan amount and term selected).

But you may be more driven to try the debt avalanche or debt snowball methods of repayment.

“The financial professional in me says to put more money toward the debt with a higher interest rate and some money at the debt with lower interests rates; but never focus on just one expense at a time,” Green said. “But as a human, you may ask yourself ‘which of these debts is a moral victory to pay off?’”

If you owe money to a friend or family member and paying that debt off is a mental relief, Green suggests paying that off first and then moving on to other debts.

As a young adult, it’s important to make a plan to pay off and manage your debt to avoid heavy interest fees.

5. Build credit

A credit report is a report that shows your credit history and is used to determine your creditworthiness. Building a strong credit history and maintaining a high credit score are essential for your financial health. In your early 20s, it’s important to build your credit by paying your credit cards and utilities on time but avoiding debt in the process.

“Never live above your means and use credit for money that you don’t have,” Green said. “I never recommend buying anything on credit unless you have the means to pay it off in full at the end of every month.”

Using a credit card to build credit is a smart use case, but if you can’t afford to pay it off by the end of the billing statement, you probably can’t afford it in the first place.

6. Protect yourself financially

As you enter adulthood, you’ll want to make sure that you are protecting yourself and your finances with adequate insurance. Take advantage of the benefits offered at work — health insurance, life insurance, short and long-term disability insurance and 401(k) match, if offered. You may consider additional benefit packages outside of what your work offers.

“I always recommend you have something outside of work so you have control and coverage should you leave your employer,” Green said.

Managing your money and knowing where to get started with financial planning can be overwhelming and confusing — especially when you’re in your 20s. Finances can be complex, but it’s essential to educate yourself, find out what resources are available to you and start having financial conversations earlier rather than later in life.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

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Personal Loans

Small Personal Loans: How to Find One and Qualify

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

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Personal loans are the fastest-growing consumer debt in America, according to Experian.

Where a mortgage goes toward buying a home and an auto loan goes toward the purchase of a car, a personal loan can be used in myriad ways. This article will define small personal loans and walk you through a variety of ways to use and get them.

What is a small personal loan?

A small personal loan is defined as anything between $1,000 and $5,000, according to LendingTree, which owns MagnifyMoney. Because small personal loans usually have low interest rates for those with good credit and can be paid back over a relatively short amount of time (two to three years), they allow borrowers quick access to money that can be used at their discretion, unless otherwise specified.

When used wisely and paid back on time, small personal loans can reduce stress, help solve financial problems and build credit. If you’re in need of a few thousand dollars to cover an expense, a small personal loan is worth considering.

“When you have little to no credit history, a small, unsecured loan with a short term that is quickly repaid can help build a positive credit history,” said Tricia Cook, branch manager for First Utah Bank.

Small personal loans are commonly used to help consolidate debt into one manageable payment, but can also be used to pay for medical, dental or veterinary bills, remodels or home repairs, weddings or funeral costs and unexpected expenses, to name a few.

“Usually, small personal loans are applied for in emergency situations, for example, your roof is leaking and you need $5,000 to replace it before winter,” Cook said. “My experience at the bank has shown that small personal loan applications rarely feel like they are planned for and the applicant is desperate for money right now.”

Where to get a small personal loan online

Once you’ve determined you need a small personal loan to cover an expense, you’ll want to start shopping and comparing lenders.

LendingTree’s small personal loan comparison tool can point you in the right direction. Using it, you’ll input basic information about yourself and what you’re looking for in a loan. The tool may then spit out loan offers from up to five different lenders based on your creditworthiness for you to consider.

LendingTree
APR

As low as 3.49%

Credit Req.

Minimum 500 FICO®

Terms

24 to 60

months

Origination Fee

Varies

SEE OFFERS Secured

on LendingTree’s secure website

LendingTree is our parent company

Advertiser Disclosure

LendingTree is our parent company. LendingTree is unique in that you may be able to compare up to five personal loan offers within minutes. Everything is done online and you may be pre-qualified by lenders without impacting your credit score. LendingTree is not a lender.


A Personal Loan can offer funds relatively quickly once you qualify you could have your funds within a few days to a week. A loan can be fixed for a term and rate or variable with fluctuating amount due and rate assessed, be sure to speak with your loan officer about the actual term and rate you may qualify for based on your credit history and ability to repay the loan. A personal loan can assist in paying off high-interest rate balances with one fixed term payment, so it is important that you try to obtain a fixed term and rate if your goal is to reduce your debt. Some lenders may require that you have an account with them already and for a prescribed period of time in order to qualify for better rates on their personal loan products. Lenders may charge an origination fee generally around 1% of the amount sought. Be sure to ask about all fees, costs and terms associated with each loan product. Loan amounts of $1,000 up to $50,000 are available through participating lenders; however, your state, credit history, credit score, personal financial situation, and lender underwriting criteria can impact the amount, fees, terms and rates offered. Ask your loan officer for details.

As of 17-May-19, LendingTree Personal Loan consumers were seeing match rates as low as 3.49% (3.49% APR) on a $10,000 loan amount for a term of three (3) years. Rates and APRs were based on a self-identified credit score of 700 or higher, zero down payment, origination fees of $0 to $100 (depending on loan amount and term selected).

As you begin your search, consider these online lenders:

Upstart

Upstart offers loans with interest rates low as 6.18% and terms of up to five years. Upstart can be a good choice for small personal loans because it can lend as little as $1,000, depending on the state in which you live. Upstart can also be a good choice because it assesses more than credit score and credit history when determining a rate. It looks at the borrower’s education, area of study and work history for a more holistic picture of the borrower and their ability to repay. If you have a strong education and work history, you’ll likely benefit from a loan with Upstart. Upstart also allows you to pay off your loan on your terms without penalizing you.

APR

6.18%
To
35.99%

Credit Req.

620

Minimum Credit Score

Terms

36 & 60

months

Origination Fee

Up to 8.00%

SEE OFFERS Secured

on LendingTree’s secure website

Upstart is an online lender created by ex-Googlers.... Read More

Avant

Avant can be a smart option for those with a low credit score looking for a quick loan. If you qualify, funds can be accessed in as little as one business day. The minimum credit score required for an Avant loan is 580. If your credit score is hindering you from receiving a loan elsewhere, Avant may a good option for you. The minimum loan available is $2,000, with interest rates starting at 9.95% and terms up to 60 months.

APR

9.95%
To
35.99%*

Credit Req.

600

Minimum Credit Score

Terms

24 to 60**

months

Origination Fee

Up to 4.75%**

SEE OFFERS Secured

on LendingTree’s secure website

Advertiser Disclosure

Avant is an online lender that offers personal loans ranging from $2,000 to $35,000. ... Read More


*If approved, the actual loan terms that a customer qualifies for may vary based on credit determination, state law, and other factors. Minimum loan amounts vary by state.
**Example: A $5,900 loan with an administration fee of 4.75% and an amount financed of $5,619.75, repayable in 36 monthly installments, with an APR of 29.95% would have monthly payments of $250.30.

Based on the responses from 11,574 customers in a survey of 210,584 newly funded customers, conducted from 1 Feb 2018 - 1 Aug 2019 95.05% of customers stated that they were either extremely satisfied or satisfied with Avant. 4/5 Customers would recommend us. Avant branded credit products are issued by WebBank, member FDIC.

LendingClub

LendingClub can offer small loans starting at $1,000 with interest rates as low as 6.95%. LendingClub offers loans to borrowers whose credit scores vary, but their minimum credit requirements are not specified. If you’re looking for a small loan and have a strong credit history, this may be a smart option for you as you’ll likely get lower interest rates. But if you’re looking to receive your funds almost immediately, LendingClub may not be the best option as it takes about a week to receive your money.

APR

6.95%
To
35.89%

Credit Req.

Not specified

Terms

36 or 60

months

Origination Fee

1.00% - 6.00%

SEE OFFERS Secured

on LendingTree’s secure website

LendingClub is a great tool for borrowers that can offer competitive interest rates.... Read More

Best Egg

Best Egg may be the lender for you if you’re looking for a fast and easy loan application process. Funds are deposited in as little as a day, and Best Egg offers interest rates as low as 5.99% to those who qualify. Best Egg analyzes three years’ worth of credit history and requires a 640 minimum credit score, so it may not be the best option for those with poor credit. Best Egg offers terms for up to five years and will loan as little as $3,000.

APR

5.99%
To
29.99%

Credit Req.

640

Minimum Credit Score

Terms

36 or 60

months

Origination Fee

0.99% - 5.99%

SEE OFFERS Secured

on LendingTree’s secure website

Advertiser Disclosure

People looking for a process that is fast and straightforward can’t go wrong when applying through Best Egg for a personal loan. ... Read More


The Annual Percentage Rate (APR) is the cost of credit as a yearly rate and ranges from 5.99% to 29.99%, which may include an origination fee from 0.99% - 5.99% that is deducted from loan proceeds. Any origination fee on a loan term 4-years or longer will be at least 4.99%. The loan term and the APR offered will depend on your credit score, income, debt payment obligations, loan amount, credit usage history and other factors. Additionally, the APR offered is impacted by your loan term and may be higher than our lowest advertised rate. Requests for the highest loan amount may result in an APR higher than our lowest advertised rate. You need a minimum 700 FICO® score and a minimum individual annual income of $100,000 to qualify for our lowest rate.

Best Egg loans are unsecured personal loans made by Cross River Bank, a New Jersey State Chartered Commercial Bank, Member FDIC. Equal Housing Lender. "Best Egg" is a trademark of Marlette Funding, LLC. All uses of "Best Egg" on this site mean and shall refer to "the Best Egg personal loan" and/or "Best Egg on behalf of Cross River Bank, as originator of the Best Egg personal loan," as applicable. Loan amounts generally range from $3,000-$35,000. Offers up to $50,000 may be available for qualified customers who receive offer codes in the mail. The minimum individual annual income needed to qualify for a loan of $50,000 is $130,000. Borrowers may hold no more than two open Best Egg loans at any given time. In order to be eligible for a second Best Egg loan, your existing Best Egg loan must have been open for at least four months. Total existing Best Egg loan balances must not exceed $50,000. All loans in MA must exceed $6,000; in NM, OH must exceed $5,000; in GA must exceed $3,000. Borrowers should refer to their loan agreement for specific terms and conditions. Your verifiable income must support your ability to repay your loan. Upon loan funding, the timing of available funds may vary depending upon your bank's policies.

To help the government fight the funding of terrorism and money laundering activities, federal law requires all financial institutions to obtain, verify, and record information that identifies each person who opens an account. When you open an account, we will ask for your name, address, date of birth, and other information that will allow us to identify you.

Small loans from credit unions

Getting a small loan from a credit union is another option besides shopping for one online. Credit unions are regulated and insured nonprofits. They are often community-focused.

A credit union is a good place to get a small loan because you can become part of the credit union community, build relationships with the members and potentially get lower interests rates on your small loan.

When applying for a loan, credit unions will assess many factors, such as your credit report and ability to pay back the loan. When obtaining a loan from a credit union, come prepared with your Social Security number, proof of income and personal identification.

Check out personal loan offers at credit unions here.

Small loans from banks

Small loans can ease financial stress when used wisely. Working with a bank to get a small personal loan is a smart idea because the federal government heavily regulates banks. These regulations aim to protect the borrower from getting in too much debt.

Before granting you a loan, the bank will look at your financial history to assess how much money they can reasonably lend you. This will help ensure you are not in over your head when you get the money.

“The ability-to-repay rule [under the Truth in Lending Act] ensures that banks have looked at your current income and your current debt and are able to prove that you have the ability to repay the full balance, not just the monthly minimum payments,” Cook said. “A bank cannot lend to you in a way that would make you overextended.”

When shopping for a small loan from a major bank, you may consider local options such as Citibank or Wells Fargo. But you can review the best personal loans here.

Alternatives to a small personal loan

When you need to borrow money and do not wish to obtain a personal loan or cannot get one due to poor credit, there are a variety of other ways to get a loan. Here are four alternatives to a small personal loan from a bank or credit union.

1. Credit card

Using a credit card to make a purchase or pay off an expense is a viable option if you’re able to pay back the amount charged in full (and on time).

“Credit cards can be smart to have when you are smart with your spending and paying your bill to a zero balance each month,” Cook said. “People get into trouble when they use a credit card and buy things they truly can’t afford, even when the payments are split up over a few months.”

Most credit cards offer at least a 21-day grace period and will not charge interest in that time frame. After that period, if the balance is not paid in full, the cardholder will be charged interest on the remaining statement balance. Credit card interest averages 15%, so if you cannot pay it back quickly, a small personal loan is a better option as the interest rate is much lower and the monthly payment is fixed.

– Compare low interest credit cards here

2. Pawnshop loans

Pawnshop loans allow the borrower to take an item — often jewelry or electronics — to a pawnshop to be evaluated as collateral in exchange for quick cash.

“A pawnshop is a good choice if you want to sell something quickly and take the cash,” Cook said. “But if you truly intend to get your merchandise back, you’re in essence paying for that item twice. Ask yourself: ‘How much will I have paid for my belonging when I’m done?’”

The borrower typically has up to 90 days to repay a pawnshop loan — plus fees and interest, which can be upward of 200%. Pawnshop loans do not require a credit check, can be obtained quickly and do not negatively impact a borrower’s credit score if they are not paid back on time. While pawnshops are regulated by 15 federal laws, keep in mind that the interest rates incredibly high and you will likely lose your collateral should you default on the pawnshop loan.

3. Advance on paycheck

A payroll advance is a type of unsecured loan that allows an employer to release the employee’s pay ahead of time. Paycheck advances are usually used to cover an unexpected expense that must be paid immediately. If you can cover an expense with your upcoming paycheck but need it early, asking about an advance on the paycheck is worth considering.

Policies around paycheck advances differ by company, so it’s best to discuss terms with your HR department to see what options are available. But if using your entire advanced paycheck to cover an unexpected expense will disrupt your monthly budget, a small personal loan may still be your best option.

4. Borrowing from friends

Borrowing money from friends or family has its pros and cons. The upside of borrowing from a friend is you can set your own terms, negotiate interest rates (if any) and determine the repayment schedule. Friends or family who act as a lender may be more lenient with borrowing terms compared to a bank or credit union.

But asking someone close to you to borrow money can be awkward and potentially cause a strain on that relationship. Money can be a sensitive subject. When borrowing from a friend, ensure that both parties agree to the loan terms and are comfortable with the situation.

Avoid payday loans

Payday loans are short-term loans with incredibly high interest rates. Interest rates vary by state but can be upwards of 700% in some instances. Unless paid off in full on time, payday loans should be a last resort and avoided in most cases.

“The advice I’d give anyone is to stay away from a payday loan,” Cook said. “There is no one watching out for the borrower’s best interest. For example, you’ll see an ad that quotes their interest rate of 5%, which sounds good compared to the bank at 13%, but they fail to explain what’s in the fine print — that it’s 5% a month, not 5% APR (annual percentage rate).”

When you’re in need of a small personal loan, know that you have many options available to you.

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