When your bank balance is low and you have a big expense looming, you might be tempted to turn to cash advances on your credit cards. What you might not know is that there are more economical ways to borrow money. One of these is the personal loan.

In the 1998 film Rounders, characters Mike McDermott and his buddy, Worm, set out to raise a fast $15,000 by playing high-stakes poker. While they manage to gamble their way out of debt, this is an ill-advised strategy for real-life characters (like yourself). A more sensible option is the personal loan.

Overview

Available in all shapes and sizes, a personal loan can be a quick solution to a major or minor cash shortfall. Common needs might include the unexpected, like rainy day expenses, or planned events, like business investments, a child's wedding, or vacation spending.

As unsecured debt instruments, personal loans have advantages and disadvantages which differentiate them from secured home equity debt. On the plus side, personal loans are available to renters as well as homeowners who may have already tapped out their home equity. On the negative side, unsecured debt is typically more expensive than secured debt.

Structure

Personal loans can be structured as lines of credit or as short- or medium-term installment loans. The most appropriate design for you would best be decided by looking at how you plan to use the money. If the loan is needed to fund the start-up of a new business, a longer-term installment loan is probably your best option. On the other hand, if you need the money for temporary funding of seasonal household expenses, a line of credit would be more suitable.

The Process

Most lenders with established personal lending guidelines can gather the required information and provide you with an approval relatively quickly. The approval process is similar to what you'd expect: You'd get things started by discussing your needs with a lender, who'd make recommendations based on your situation. Once the two of you agree on an appropriate loan amount and structure, you'd complete an application and provide your income documentation. Your lender would then process your loan application, and follow up with you to provide the specific terms of your approval.

As with any big financial decision, it's vital for you to shop around for the best deal. Personal loans aren't as formulaic as other types of borrowing, so you may find a wide variation in the terms offered by different lenders. Spend time to research your options with several financial institutions; you'll save money and feel confident that you're making the right choice.

Leave the high-stakes gambling to those who have money to lose. If you need cash right away, a personal loan may be the way to go. When funding sources are needed, don't bet your home, and don't leave anything to chance.