Almost everyone borrows money at some point in their lives – for example, a mortgage to buy a home, a student loan, or a personal loan. There are many ways to borrow money – but some are smarter than others.

Personal and other loans

Your credit union or bank is a fantastic resource for figuring out what exact loan fits the borrower’s needs and how best to get one. Reputable lenders will discuss options and provide multiple scenarios for borrowing. They will be transparent about how much a loan will cost, including any fees. They will disclose the amount of interest they will charge over the life of the loan so the borrower can make comparisons. Ask questions, read all the paperwork, and shop around.

Approach family and friends
Asking family or friends for a short-term loan can put pressure on personal relationships. The person who loans the money may feel taken advantage of if the money isn’t paid back fast enough. The borrower may feel awkward or uncomfortable because the relationship includes a transactional situation. If family and friends are an option for helping with a loan, set clear parameters, and consider creating a contract for both parties to sign.

Promotional credit card offers
Sometimes credit cards offer zero interest rate promotions, allowing the cardholder to take out a cash advance or consolidate debt, and pay zero interest over a set period of time. The credit card companies almost always charge a fee or a percentage of the amount borrowed, so it’s like paying interest up front. If there’s a way to pay off the amount borrowed within the promotion period, be sure to do it. Credit cards can get dangerous – the interest rate will be high after the introductory rate period ends. Pay at least the minimum payment due each month to avoid triggering the higher rate.

Payday and tax refund advance loans
Avoid payday and tax refund advance loans if possible. Both types come with very high interest rates and may even have undisclosed fees. Payday loans are given out in advance of paychecks, and tax refund loans are provided in anticipation of federal or state tax refunds.

The only people who benefit from these loans are the lenders, sometimes referred to as “predatory lenders” for a good reason.