What You Need to Know About Personal Credit


Common Sources of Personal Funding, and How They WorkUnless you strictly use a cash-based budgeting system or a debit card to get by in your day-to-day life, you probably utilize some form of credit financing. But did you realize that you have a variety of personal funding options and sources other than a brick-and-mortar bank or credit card?

Even if you’re very careful with money, there will still likely be a time when you’re short on cash and in need of financial assistance. While specific laws and regulations determine the products that are offered in your state, it’s helpful to know where you can turn for help. If you’re still not sure what to do or what’s best for your unique needs, read on to find out more about common sources of personal funding and how they work.


Traditional Sources

Most banks offer credit cards, which are a form of revolving credit. With this type, you’re approved to use up to a certain dollar amount (your credit limit), and as you repay the balance, you free up your available credit for future use. While credit cards are typically used to make purchases, some types offer cash advance, which is money borrowed against your available limit. Your interest rate may be higher for a cash advance than it is for normal purchases.

Some banks offer personal loans, such as installment or lines of credit loans. In order to get a bank loan, you’ll typically need to be an existing customer of that establishment and have a certain credit score. While specific requirements of these loans will vary, your credit score plays a big part in whether or not you’ll be approved for credit.

Credit unions are typically not-for-profit banking systems that offer a lot of the same products and services that you’ll find at a normal bank. Like bank loans, a credit union loan may require you to be an existing customer of that establishment. You’ll also likely need a strong credit score to get approval for the loan.

Because banks and credit unions have more stringent borrower requirements, these establishments are essentially taking on less financial risk. Bank or credit union loans may have a lower APR than other sources. But the loan approval process can take much longer — sometimes, you won’t hear back for several days or even weeks with banks and credit unions. Due to the substantially extended timeline, this route may not be the best if you’re in need of fast cash.


Peer-to-Peer Lending

Peer-to-peer lending is a newer credit method that essentially takes the financial institution out of the equation, allowing investors to directly fund credit-seekers. Because of this model, borrowers may be able to save money on interest, and investors can theoretically see a bigger return on their investment. But since there is no intermediary, the loans are not federally backed, and the lenders usually require a high credit score in order to mitigate any risk of loan default.


Personal Network

Sometimes, personal funding comes from informal sources, like your friends and family. These types of loans may or may not require an official repayment agreement, such as a promissory note. While this method is less common than private, personal network loans, you can also utilize crowdfunding sites like GoFundMe to solicit donations from an extended personal network. However, these funds are not typically paid back.


Employer or Third-Party Paycheck Advance 

Depending on your employer, you may be able to borrow money from your own future paycheck, referred to as a paycheck or payday advance. If your employer doesn’t offer this type of service, you still may be able to borrow from your future wages. Third-party tools like Chime and Earnin are also available to help you access your earnings more quickly.


Online Lending

Online lending is another relatively new way to access an increasing number of personal funding options, like installment or payday loans, cash advance or lines of credit. Though certain companies will have specific requirements for their products, online lending serves a much broader customer base than other sources, like people with a bad or limited credit history. Because the application is online, both the approval and funding processes are typically much faster. In some cases, approved loans can be funded in just a few minutes, so this method can help you get on your feet in very time-sensitive issues.

As with any personal loan or credit product, make sure that you carefully review all the fine details and terms, including your repayment responsibility, before signing. Credit is an important financial tool, and your history stays with you; use it wisely.


The information in this article is provided for education and informational purposes only, without any express or implied warranty of any kind, including warranties of accuracy, completeness or fitness for any particular purpose. The information in this article is not intended to be and does not constitute financial or any other advice. The information in this article is general in nature and is not specific to you the user or anyone else.


Babs is a Senior Content Writer and financial guru. She loves exploring fresh ways to save more and enjoy life on a budget! When she’s not writing, you’ll find her binge-watching musicals, reading in the (sporadic) Chicago sunshine and discovering great new places to eat. Accio, tacos!