TULSA, Okla. — If you need to cover bills or make a big purchase but don't want to ask your bank or credit union for a personal loan, there are several alternatives that might be better for your financial situation.
Personal loans aren't always necessary.
"When you're coming down to alternatives for personal loans, it's either because of one of two reasons," said Denny Ceizyk, Senior Loans Writer at Bankrate.
"When it comes to not needing all the money at once, then you're really looking at the revolving credit options like credit cards, home equity lines of credit, or personal lines of credit," Ceizyk said.
Ceizyk ranks these options from most to least advantageous for consumers. Personal lines of credit top his list if you can qualify.
"Banks typically will offer really good terms with no fees on those options," Ceizyk said.
For homeowners, home equity lines of credit (HELOCs) come in second place.
"Those give you the flexibility of being able to use and reuse that money, pay it off, and an added benefit of potential tax deductions if you're using the money for home improvements," Ceizyk said.
Credit cards rank last on his list of recommendations due to their impact on your credit score.
"That's because running up a balance on your credit card affects your credit utilization ratio," Ceizyk said. "So that means if you have a $1000 available credit, you use $300 of it, then that credit utilization ratio is going to have an impact on your credit scores. So that's why I think that those should really be a last resort go-to unless you know for sure that you can pay the entire balance off after you charge it within a month."
For smaller purchases, buy-now-pay-later plans offer another short-term option with no fees, allowing consumers to spread payments over several weeks.
"The only danger to those that I see is that it puts you on this high-frequency payment schedule. So, most people are used to making their payments every month. Buy now, pay later puts you on a biweekly payment," Ceizyk said.
Additional alternatives to personal loans can be found on Bankrate's website.
This story was reported on-air by a journalist and has been converted to this platform with the assistance of AI. Our editorial team verifies all reporting on all platforms for fairness and accuracy.
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