When it comes to investing, borrowing money is a commonly used way to attain the needed funds, given that not many investors have constant cash flow for numerous investing endeavors. Luckily, there are a variety of professional financing options nowadays that can aid you in your investing goals. Ranging from traditional financing institutions such as banks, financing companies and credit unions, to online funding creations, such as P2P lending and lastly, from your personal 401 (k) plans to public agencies; a specter of options, each suitable for different financial situations and individual borrowing needs. This article lists some of these options every investor has when borrowing the needed funds.
The most traditional of all the options consumers have are banks; they represent a solid source for individuals that are looking to borrow a certain amount of funds. This is how they work: they take in deposits and later distribute them among their clients in the form of loans and mortgages. When you visit a bank, you’re presented with a variety of options: mortgage products, auto loans, personal loans, construction loans, as well as refinancing an existing loan at a more affordable rate.
- Credit Cards
You might not be aware of it, but every time you swipe your credit card, you are borrowing money in a way. Money is advanced to you by the credit card company for your product or service and later, you repay them after receiving a credit card statement. However, credit cards can be used for actual funds, not just for purchasing goods and services, and this type of funding is called a cash advance.
- Peer-to-Peer Lending (P2P)
Peer-to-peer lending is also known as crowdfunding or social lending and it enables individuals to borrow and lend money amongst each other directly, without an official institution in between, as a third party. Even though it removes the middleman from the equation, it takes more effort and time, but also involves risk, that may be avoided when using the services of an official financial institution. The funds are received from individual investors who are lending their own money for an interest rate that is agreed upon in advance, and the entire process is done through a P2P online platform.
- Credit Unions
A cooperative institution which is controlled by its members – the people who use the services is a short definition of credit unions. Members of the credit union are usually people from particular groups, a community or an organization and in order to borrow, you need to be a part of one. Credit unions are often nonprofit enterprises, which implies more favorable rates.
- Financing Companies
Finance companies are specifically dedicated to borrowing money, but unlike banks or credit unions, these companies do not accept deposits or give safe-deposit boxes and credit cards. Their routine is giving out loans to individuals or businesses that are in need of funds. Some lenders make long-term loans, while a portion of them focuses on short-term loans. It is noteworthy to mention that finance companies are regulated by the state in which they operate, but are not subject to federal rules and oversight, like banks and credit unions are.