Fast Ways to Raise Cash

Do You need to raise cash quickly? Perhaps you have a wedding to pay for, or some college tuition bills that are coming due soon. If so, you can still find loans that offer terms of endearment.

Start with your family. Loans from family members are inexpensive and need not be secured by collateral. If the loan is interest free, it could be subject to federal gift tax laws. But under those laws, a relative can lend you up to $10,000 without incurring any gift tax.

Of course, in exchange for cheap credit, you run the risk of straining a family relationship. To lessen that possibility, you should draw up a promissory note. You can get preprinted forms at many stationery stores. The agreement should include a repayment schedule. If interest is charged, you should agree to an annual rate that is high enough to compensate your relatives for their forgone income. That figure might be as much as 10%.

In order to borrow against your life insurance policy you need the kind that has cash value, such as whole life. The amount you can borrow will depend on the number of years that the policy has been in effect, your age when it was issued and the size of the policy's death benefit. You do not have to disclose the reason for the loan, and you can repay at your own pace or not at all. The interest rate probably will range between 5% and 8% per year. The longer you have been building your policy's cash value, the lower the rate.

More and more company sponsored savings and profit sharing funds also let vested employees borrow against the money they have in the plans. Typically, you can borrow $ 10,000 of your vested assets, with a limit of $50,000. Federal restrictions limit the maximum permissible loan to $50,000, and loans between $ 10,000 and $50,000 cannot exceed half your vested benefit in a company savings plan. How much interest will you pay? Companies usually base the charges on broad indexes of interest, such as the prime rate.

Generally, with a company plan you are also required by federal law to repay the loan at least quarterly and total repayment must be completed within five years. But if you are using the money to buy your primary residence, you can get a payback period of from 10 to 25 years.

The cheapest consumer loans typically are offered by credit unions. But the differences between their rates and those of other lenders has narrowed. That is one reason why you should shop around carefully before you sign any papers.

Another reason is that few credit unions make unsecured personal loans larger than $5,000. By contrast, many banks give their customers $10,000 credit lines secured only by a signature. To qualify, you will have to satisfy a series of income, net worth and length of employment requirements.

You can join a credit union by depositing only a nominal sum typically as little as $5. To qualify you generally must belong to the group whose members formed the credit union a church, a labor union, a community or professional organization. But joining a credit union is a lot easier than it used to be. You may be eligible and not even know it. In 1982, the National Credit Union Administration liberalized its regulations. No longer do you have to work for the same company or belong to the same union as other members. For example, the First Community Credit Union in St. Louis previously could serve only employees of the Monsanto company. Now it is open to residents of three communities near the Monsanto headquarters and to employees of over 200 other companies in the area. Some credit unions now even permit members' distant relatives to join.

If you own stocks or bonds at a brokerage house, you can borrow on margin. You just pledge a portion of your holdings as collateral. Interest is usually charged to your account and compounded once a month.

The size of the margin loan you will qualify for depends on the type and market value of the securities you pledge. If you want $15,000 to buy stocks, for example, you must already own shares or convertible bonds worth that amount. However, if you want to borrow $15,000 to buy a car, you will need $30,000 worth of these securities. Other forms of securities, such as municipal bonds and Treasury notes, may also be used for collateral, but brokerage houses differ somewhat on their margin requirements.

Now, say you have one of the new asset management accounts at a bank or a brokerage house. You can borrow against your deposited assets by cashing checks drawn on the account.

Another way to get a loan is to borrow against the equity you have built up in your home. Your choices include home equity accounts, second mortgages and refinancing.

Of the three, home equity accounts are probably the least costly. They are essentially overdraft checking accounts that you can open at a bank or brokerage firm, using the equity in your home to secure the credit.

If other lenders will not oblige, then you can investigate consumer finance companies. Such firms make high rate loans to high risk customers.

Finally, if you need some money for just a short period of time, you can even consider borrowing from Your Individual Retirement Account. No, you cannot permanently take money out of your IRA without paying income taxes on it and a 10% penalty. At least you cannot do it unless you are 59 1/2 or older. But it is all right to withdraw some or all of your IRA funds once a year if you make a rollover and replace them within 60 days. There is no penalty on that.

Just go to the bank or brokerage house or wherever you have your IRA on deposit and take out some or all of your assets. If your IRA is invested in stocks or mutual funds, you may sell them. But be sure to replace all those assets within 60 days.

When you borrow from your IRA, you pay no interest on the loan, of course, because you are acting as your own banker. On the other hand, you will not collect any interest or dividends on your money so long as it is out of your Individual Retirement Account.