The norm to apply for a personal loan is set in stone as soon as one needs immediate cash at one’s disposal! Is that always the best option, though?
Personal loans have several limitations, such as high interest rates, fixed monthly payments, and longer loan terms that may extend up to seven years. Borrowing from a personal loan can increase your financial burden during times of emergencies and distress.
To resolve these issues, we present to you the 7 best personal loan alternatives that can help you acquire credit quickly and economically to fulfill your needs.
When to Avoid a Personal Loan?
As a debtor, you must avoid using a personal loan to cover your recurring, need-based expenses, as the final amount you require is unknown. On the contrary, personal loan applications necessitate you to specify the loan amount in advance, which you cannot alter afterward throughout the loan term.
At times, you may be unable to find a personal loan with affordable interest rates. Under these circumstances, rushing into a higher-interest personal loan may backfire and degrade your credit score. Instead, you must explore other alternatives to personal loans that let you borrow at lower or no interest rates.
Nevertheless, borrowing any loan, let alone a personal loan, may not be required if your monetary needs are too small. We have better options to cover such unplanned, unprecedented expenses without increasing your short-term or long-term financial burden.
Lastly, since most personal loans are unsecured, they charge higher interest and offer shorter loan terms than secured loans. If you have a valuable and handy asset, we recommend going for a secured loan that’s far more cost effective than its counterpart.
7 Personal Loan Alternatives in 2025
Let’s pivot to the best personal loan alternatives that are affordable, fulfilling, and do not impact your credit score. Some may not even incur any interest!
1. Credit Cards
Credit cards, one of the most popular personal loan alternatives, allow you to borrow on a need basis. Unlike personal loans, you won’t get a fixed credit amount at once. Instead, you can swipe it whenever you want to cover an immediate expense. Regarding the repayment, you need not pay back the entire borrowed amount every month.
Instead, credit cards allow you to pay a minimum share of your overall credit balance, in addition to interest and platform fees, to avoid paying late fees and maintain a good credit score. The rest of the due amount with interest can be paid later.
Best For:
- Debtors who need credit to cover recurring expenses.
Pros:
- Borrow when you need, without collateral
- Pay a minimum share of credit to avoid defaulting
- Cover all types of expenses
Cons:
- Higher interest rates compared to personal loans
- Defaults may immediately degrade your credit score
2. Payday Loans
Payday loans are small amounts of institutional credit granted between two paychecks to cover your day-to-day expenses or unplanned payments that exceed your monthly budget. The interest rates are extremely high, and the entire repayment must be completed by your next paycheck.
Best For:
- Debtors who need credit within their monthly income limits.
Pros:
- Available for bad credit scores
- No Collateral required
- Credit can be used for any purpose.
Cons:
- Can only borrow up to $500
- Short repayment period (28-30 days)
- Interest rates are too high and may extend to triple-digits
3. Home Equity Loans
Home equity loans are secured loans granted against your home equity collateral. It can be calculated as the difference between your home’s current market value and your due mortgage. Depending on the equity, you can secure a large loan amount from any licensed lending institution.
The repayment terms are phenomenal, as the interest rates are the lowest among other personal loan alternatives, and the maturity may extend up to three decades. Additionally, you will receive tax-saving benefits if the loan is exclusively used for home improvement purposes.
Best For:
- Debtors who have a high home equity.
Pros:
- Extremely low interest rates
- Longer loan term (up to 30 years)
- Borrowing permitted for large amounts
Cons
- Need a considerable home equity to qualify
- Risk of property seizure in case of default
- Approval may take weeks
4. Peer-to-Peer Lending
Peer-to-peer lending is a non-institutional credit sought from a group of investors. It’s a great option if you’re facing continuous refusals on your loan applications from institutional creditors.
The credit history checks in P2P lending are minimal, and since you are applying to multiple creditors at once, the chances of approval increase exponentially.
Best For:
- Debtors with bad credit scores and compromised credit history
Pros:
- Can negotiate loan terms and interest rates
- Little to no credit history checks
Cons
- The loan amount is limited to what the highest-bidding investor can offer
- Lack of central regulation and legal backing
5. Borrowing from Retirement Accounts
Be your own lender and borrow from your giant retirement kitty! It’s probably the safest option, as even the repayment of the principal or interest amount goes down as your savings. Additionally, no negative impact is caused on your credit score and history.
The consequences of default only include an additional tax on the unpaid loan balance and around 10% early withdrawal penalty. However, to qualify, you and your employer need to be a part of either the 401(k) or 403(b) plans.
Best For:
- Debtors who need a small amount of credit but cannot afford to lose their long-term savings.
Pros:
- Lower interest rates
- No actual loss from your long-term savings
Cons
- You can only borrow 50% of your retirement savings, up to $50,000
- Default may lead to additional tax consequences
6. Cash Advance Apps
Certain cash advance applications like Albert, Brigit, Chime, Money Lion, and more allow you to borrow money for an amount you can quickly repay from your next paycheck. However, unlike traditional payday lenders, their interest rates are not as high.
Moreover, the repayment terms are flexible, and you can repay the borrowed amount in installments. The approvals are quick, and no heavy credit history checks are required. You can even pay an extra instant transfer fee to get the funds into your account at lightning-fast speed!
Best For:
- Debtors seeking a low-interest, flexible alternative to payday loans
Pros:
- Low interest rates
- Flexible repayment terms
Cons:
- Limited credit amount under $500
- High subscription and transfer fees
7. Salary advance
One of the other paycheck-based alternatives to personal loans is salary advances. You can get instant cash without credit by negotiating with your employer to grant an advance of your salary before the due date.
Since it does not qualify as a traditional loan, you need not pay any interest on the amount you receive. However, the option can only be accessed if you need a small amount of credit and are willing to sacrifice your paycheck for the next month.
Best For:
- Debtors who seek a small cash advance within their paycheck limits without borrowing credit.
Pros:
- No repayment required
- No impact on credit score and history
Cons
- Credit amount cannot exceed your monthly paycheck limits
- Qualification is subject to the employer’s agreement
- Monthly income decreases
