There are a few specific sources that you should look for when it comes to borrow money. Though there are several money lending sources available out there, both online and offline, all may not be suitable for you. Ideally, when you borrow money you enter into an agreement with the lender and therefore the first basic thing to look for in money lending and borrowing is to create a suitable partnership.

From time to time, you may be in need to borrow money just like anyone else. This borrowed money can serve a lot of varied purposes such as:

  • Starting a new business
  • Erecting a new deck in your backyard
  • Buying a new home or car and for a plethora of reasons.

However, irrespective of the purpose of borrowing you should find the best source of money lending. Financing is a risky business, both for the borrower and the lender and therefore it is required that you look for some of the more popular sources of money lending and review the pros and cons as well that are associated with each before finally choosing one for your monetary needs.

Credit Union Lending

One of the most popular sources for people to borrow money is the credit union. It is considered to be a cooperative institution is controlled by its members or those people that use the services of it. Credit unions have specific features that make them popular such as:

  • These tend to contain members of a particular group, community or an organization
  • One has to belong to that group or community in order to borrow money
  • These are typically nonprofit enterprises and therefore can lend money at more favorable rates as compared to other online sources such as and even traditional banks and
  • The fees charged by them such as the lending application fees are cheaper as well as the transaction fees that usually gets the consumers nickel-and-dimed by the banks. with transaction fees like they do at banks.

However, most of the credit unions only offer plain and simple vanilla loans rather than a range of different types of loan products that you typically see with the large traditional banks.

Peer-To-Peer Lending


Commonly known as P2P lending, peer-to-peer lending is another common source for borrowing money. It is also known by a couple of other names such as social lending or crowd lending.

  • The process involves debt financing wherein individuals can borrow and lend money without requiring the assistance of any official financial institution acting as an intermediary.
  • The process however involves more time, risk and effort as compared to any other general brick-and-mortar lending sources.

The profile of the borrowers is displayed usually on the online platform. The investors can assess their profiles in order to determine whether or not they want to lend the person with the money demanded.

Bank borrowing

You can also borrow different types of loans from banks if you want safe borrowing. Banks are money lenders that offer a large variety of loan products such as:

  • Mortgage products
  • Construction loans
  • Personal loans and different other loan products.

All these products are designed according to the needs of the customers. Banks take in deposits and lent it to the persons who need it on higher interest than that offered to the depositors. Banks are the most traditional and safe source of funds though it may not be easy to get it. After all the entire process involves a lot of paperwork.

However, there is a downside in getting loans from a bank. The fees can be really hefty when you take a loan from the bank. In fact, there are a few banks that are infamous for charging fees under different heads such as:

  • Check fees
  • ATM transaction fees
  • Maintenance fees
  • Loan application fees
  • Minimum balance fees and a large number of other charges.

Typically, banks are either privately owned or by the shareholders. As such, the banks are obliged to their shareholders and not to the individual customer.

Finally, banks have the right to sell your loan to another bank, a financing company and even to a third party in case you default on your loan repayments. That means the procedures and fees both can change, often without adequate notice.

401(k) Plans

If you do not want any outside money lending source, you can also borrow from your 401(k) plan. Ideally, this is a plan in which the employees set aside some money for retirement. This fund then increase on a tax-deferred basis. The primary purpose of this plan is to provide the employees retirement benefits and this happens to be the last resort for borrowing.

When you borrow from your 401(k) plan, it is technically your own money that you will be using. Therefore, there will be typically no application or underwriting fees involved in it when you withdraw your money and use it for any purpose.

However, the cons of borrowing from your 401(k) will vastly offset the positives which makes this the last option for borrowing money.

  • First, when you withdraw funds from your 401(k), it will have some tax consequences
  • You may also have to bear an additional 10% penalty on your withdrawal
  • Since you will lose out on the tax-deferred funds you will also lose out on the compounded interest on the amount withdrawn.

All these things will surely have a serious and adverse effect on your retirement plans.

Credit Card Borrowing

If you can use it properly and pay off your balances responsibly, then credit cards can be a great source of loans. However, you should be aware of the costs so that you do not face any undue hardship.

Using margin accounts is another source for borrowing in which the equity of these accounts is typically used as collateral. The interest rates are usually better than other sources of financing. You may also try out the government lending sources if you are okay with the daunting paperwork.

However, the bottom line is you should analyze the pros and cons of each these potential sources of fund to choose the most suitable one for you.