Personal loans can be used for a number of purposes, including emergencies and large purchases. However, depending on your financial situation, a personal loan might not be a good fit.

If you’re not sure that a personal loan is the right fit for you, there are alternatives. Let’s take a look at seven alternatives to personal loans and provide information that can help you figure out what might work best for you depending on your circumstances, such as whether you have bad credit or need funding fast.

7 Personal Loan Alternatives
	Description of Alternative	Who It’s Best for
1. Credit Card	Line of credit, accessed by card, that offers access to funds on a rolling basis. You may get a promotional rate if you have good credit.	Someone who wants to borrow at need and who can pay off the balance before interest is charged.
2. Line of Credit	Provides access to funds on a rolling basis, up to a limit. However, you often get access to higher limits than with a credit card.	Those who need access to a higher limit or want a bigger lump sum at a lower rate of interest.
3. Peer-to-Peer (P2P) Loan	Investors fund the loan rather than a single lender. The borrower might need to wait until the loan is fully funded to access the capital.	Someone having trouble qualifying for a traditional loan and who can wait extra time to receive the money.
4. Home Equity Loan or Home Equity Line of Credit (HELOC)	Access to funds based on the equity you have built in your home. Can be a lump sum or a rolling line of credit.	Those who have equity built up in their homes and want a lower rate, and who are likely to avoid foreclosure.
5. Payday Loan	Loan offered based on your upcoming payday. Usually short-term with a high interest rate.	A person who needs money quickly and temporarily and is likely to repay the loan within a few weeks.
6. Retirement Loan	Borrow the money from a retirement account instead of from a traditional lender. Rates are usually lower.	Someone who expects to be in a job for an extended period and can repay the loan within five years.
7. Salary Advance	Receive a portion of your next salary payment in advance, usually in agreement with your employer.	A borrower who has an employer that offers this option at a low cost or even for no cost.

1. Credit Card

A credit card functions as a line of credit. Normally, you have a credit limit and rolling access to your credit line. As you make payments, you “free up” room on your credit card for additional purchases.

With this revolving line of credit, you only borrow as you need the money. You have the option to pay off your balance each month, or you can pay down your balance over time, depending on your situation.

It’s important to note, though, that when you carry a balance from month to month, you’ll pay an interest fee. Depending on your credit situation, this fee can be higher than what you would pay with a personal loan. However, if you can pay down your balance regularly, you’ll be less likely to need to worry about interest.

Credit cards also offer access to cash advances. So, if you need cash rather than simply paying for items with your credit card, it’s possible to receive an advance based on how much available credit you have. However, there is usually an additional fee associated with a cash advance, and some credit cards charge a higher rate of interest.

Finally, for those with good credit, it’s possible to get a promotional interest rate that can be as low as 0%. If you qualify for a 0% annual percentage rate (APR) on a credit card for up to 24 months, you might be able to get a better deal than you would with a personal loan. As long as you can pay off your balance before the end of the introductory period, a credit card might be a better fit for your finances.

2. Personal Line of Credit

If you have a personal line of credit, it functions similarly to a credit card. You might even have a card to access your credit. However, a personal line of credit is usually connected to your bank, and you might need to connect it to a checking or savings account.

As with a credit card, your money is available on a revolving basis, and you can borrow (and repay) as needed. However, you usually have a lower interest rate than with a credit card, and might even have a lower interest rate than with a personal loan.

3. Peer-to-Peer (P2P) Loan

A peer-to-peer (P2P) loan is usually offered through a collection of investors rather than just one lending institution. You might go to a website, express your funding need, and then multiple investors will decide how much they will put toward your funding need.

If you can’t qualify with a traditional lender, you might be able to get funding through a P2P platform. Investors might be willing to take a chance on you, even with poor credit, for the potential for higher returns in the form of a higher interest rate.

However, it can take longer to have your loan funded, and you might not get the total amount you ask for. This can set you back as you attempt to access the money you need.

4. Home Equity Loan or Home Equity Line of Credit (HELOC)

If you own your home and have built up equity in it, you might be able to borrow against that equity for what you need. A home equity loan is usually a lump sum, and if you want to borrow again, you need to submit a new loan application. On the other hand, a home equity line of credit (HELOC) operates similarly to a personal line of credit in that you can access what you need as you need it and only pay interest on what you use.

Depending on the situation, you might have to go through a home appraisal to determine the size of your loan or line of credit. It might take longer to get approved for a home equity loan or a HELOC than with a personal loan due to the paperwork. However, many lenders offer lower rates on a home equity loan or a HELOC than they do for a personal loan.

5. Payday Loan

Payday loans are notorious for high interest rates and fees. However, for those who need fast funding and can potentially pay off their debt in a couple of weeks, they might provide immediate relief in case of an emergency.

Generally, to access payday lending, you need to have a checking account and be able to show that you receive regular pay from a stable job. Payday lenders are often willing to extend the term of your loan, but you usually need to pay a fee. As a result, payday loans can potentially result in you being stuck in a cycle of high-interest debt. Payday lending is particularly predatory to low-income communities, domestic violence survivors, and other vulnerable groups.

For the most part, these loans are best avoided. However, if you are experiencing a very temporary cash crunch and can repay the loan without extending, they can be acceptable in a pinch.

6. Retirement Loan

It’s possible to borrow against your retirement account as long as your employer allows this type of program. With a retirement loan, you can take money from your account with the understanding that you will make regular payments, with interest, back into your account. You usually have five years to repay your retirement loan.

Understand, though, that if you leave your job before the loan is repaid, you will need to pay off the balance within 60 days. Otherwise, the remainder will be considered an early withdrawal, subject to penalties and taxes.

A retirement loan can make sense for someone who wants to repay themselves and who reasonably expects to remain in their job for five years.

7. Salary Advance

Rather than getting a payday loan or borrowing from your retirement account, you might be able to receive a portion of your paycheck early. However, these programs depend on your employer’s policies. Some employers offer these programs as an advance program or allow you to talk to the human resources department on a case-by-case basis.

Depending on the program, you might repay the advance a little at a time or all at once. There might also be administrative fees and other costs. However, some programs don’t cost anything and can be a good alternative to a payday loan.

How Do People Use Personal Loans?

venuscurves.commissioned a national survey of 962 U.S. adults between Aug. 14, 2023, to Sept. 15, 2023, who had taken out a personal loan to learn how they used their loan proceeds and how they might use future personal loans. Debt consolidation was the most common reason people borrowed money, followed by home improvement and other large expenditures.

The Bottom Line

Personal loans can offer flexible funding options, but they aren’t always available for everyone. If you don’t qualify for a personal loan, or if you don’t feel like the personal loan meets your circumstances, you can get an alternative, such as a credit card, a HELOC, or even a salary advance. Carefully consider your situation and your funding needs as you determine the best way to get your funding.