The coronavirus pandemic has cost millions of Americans their jobs and hit the finances of many more. If you need to borrow money for the short term to make ends meet, you might be wondering how best to do it. Here are three options, starting with the best route.

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1. A home equity loan or HELOC

If you need the cash, your best and easiest bet is usually to borrow against your home. First, you don’t need a lot of credit; you just need equity in a property. It is therefore quite easy to qualify. And the interest rate you pay on a home equity loan or line of credit (HELOC) is often much lower than what you would pay on a personal loan.

Confused About How Home Equity Loans And HELOCs Are Different? With the first, you borrow a lump sum and pay it back in installments. With the latter, you have access to a line of credit that you can draw on as needed. That way, you don’t necessarily borrow one lump sum at a time and earn interest on it.

Of course, there is a downside to borrowing against your home – if you don’t make your payments, you risk losing your home. But aside from that caveat, it’s probably your easiest and most profitable bet. At the start of the pandemic, some lenders limited HELOCs, but that option appears to be opening up again.

2. A personal loan

A personal loan allows you to borrow money for any purpose, and your ability to qualify usually depends on your credit score. There are personal loans available for borrowers with poor credit, but they usually come with a higher interest rate.

The advantage of a personal loan is that you pay much less interest than if you took expenses off a credit card and paid them off over time. But you usually get a lower interest rate if you borrow against your home, and if you fall behind on your personal loan payments, your credit score could take a serious hit. Once that happens, you could really have a hard time borrowing again.

3. A 401 (k) loan

If you have your retirement savings in an IRA, you cannot borrow against it. But if you have a 401 (k), you can borrow up to $ 50,000 from it (or $ 100,000 during the pandemic, as long as you take out your loan by September 22). But not all plans offer 401 (k) loans.

Your credit score is irrelevant because you are borrowing against funds that you own. But despite the relative ease of borrowing from a 401 (k), you should only consider it as a last resort.

If you take out a 401 (k) loan and don’t pay it back on time, it is treated as a withdrawal. If you do not have 59 1/2 yet, you will be charged a 10% penalty on this amount. If you borrow from a traditional 401 (k) as opposed to a Roth 401 (k), you are taxed on that withdrawal as well.

Also, if you don’t pay off your 401 (k) loan, it could put you at a serious disadvantage in retirement. If your savings plan is short of funds, you could experience financial difficulties when your means to generate more income are limited. Having said that, you are better to borrow from a 401 (k) than to accumulate credit card debt. Therefore, while it is okay to turn to a 401 (k) loan if the above options are not on the table, do not rush until you have explored your alternatives.

Many people are borrowing money to survive during the pandemic. Even outside of the pandemic, loans are sometimes needed. If you stick to this hierarchy when borrowing, this decision is less likely to backfire.

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