Personal loans can provide cash now
Can't qualify for a home equity loan?
A personal loan may be the way to get the cash you need to cover everything from emergency car repairs, to paying down credit card debt, to making home improvements.
It allows you to borrow from a few hundred up to $50,000 at a fixed interest rate and repay the balance in regular monthly payments over the next few years.
There's no application fee and personal loans are unsecured, which means no collateral is required.
They're available at many banks and credit unions, as well as through some insurance, finance and even credit card companies.
Although interest rates on personal loans are almost always higher than those on home equity loans or lines of credit, they tend to be lower than taking out a cash advance on your credit card.
A study done last year for the Filene Research Institute, a think-tank backed by the credit union industry, found that banks charged an average of 13.8% for a 36-month personal loan, while credit unions charged an average of 12.1%.
But there are big differences in how banks and credit unions evaluate applicants, approve loans and assign interest rates.
Almost all of them will look at your credit score and credit history and verify your employment and income.
Some banks and credit unions also consider what assets you have, such as homes and retirement savings, while others don't take them into account.
Some prefer to give personal loans to those who have a savings or checking account or mortgage with them, or give current customers a lower interest rate on the loan.
Others offer lower rates to customers who apply online rather than in person.
After taking all of that into account, interest rates can be as low as 9% for the most creditworthy customers -- those with credit scores in the high 700s or above and long credit histories and approaching 30% for borrowers with poor credit histories.
Once you apply for a loan, some institutions can give you a response and have your money available in a matter of minutes, especially if you're an existing customer. In other cases, it can take several business days to have the money in hand.
The typical personal loan is for several thousand dollars and must be paid off over two to five years.
That's a much shorter period than the seven or eight years required to wipe out the balance on a credit card by making the minimum monthly payments.
You'll be required to pay back a set amount on a set date each month, which makes it much easier when it comes to planning your monthly budget.
If you request a certain amount and your financial institution isn't comfortable lending you that much, it might be willing to loan you a lesser amount.
So if you ask for $10,000 and your bank is concerned that you might not be able to pay that much back, it might make a counter offer and give you $5,000 instead.
"It doesn't help anyone to give them more than they can pay back," says Brent Vallat, senior vice president, business manager for personal credit management, at Wells Fargo.
He recommends working with your own financial institution if possible, because that bank or credit union is already familiar with the way you handle your finances.
Having your paycheck direct-deposited into your bank account, Vallat says, "obviously answers a lot of questions. Are you employed? What do you earn?"
We suspect a growing number of consumers will be considering personal loans over the next couple of years.
"This is turning out to be the right product for this time," Vallat says.