Before you apply for a personal loan
Looking for a little extra cash? Some consumers who
find they need a small amount to fix the car, buy a
new washing machine or make a down payment on Junior's
braces are passing up home equity loans or credit card
charges in favor of small, closed-end, unsecured loans.
Years ago, it was not unusual for someone to walk into
their local bank and borrow $500 to get their car fixed
or buy a new washing machine. Banks would commonly grant
unsecured "character" or "signature"
loans to people whose good name in the community was
enough of a guarantee of being paid back. Apply for a personal loans click here
If you apply for such a loan today, your banker is
likely to hand you a credit card application and send
you on your way. The massive proliferation of credit
cards, which are a form of unsecured loan, and changes
in the IRS code in the mid-1980s that eliminated tax
deductions for many consumer interest payments, have
made unsecured personal loans much less common. Those
tax changes drove people to home equity loans to buy
consumer goods because, in most cases, they still got
the deduction.
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These loans may be the easiest to get for people whose
income and savings are at lower levels. In many cases
they may be the only sort of loan -- whether it's for
emergency or fun money -- that they have a shot at from
mainstream sources.
If you have a better option -- home equity, a credit
card, 401(k) loan, a rich relative -- think twice before
borrowing without collateral. But if you have no other
way to go -- or are hell-bent on it -- take these tips.
Do your homework. Go to bankrate.com's (tm) current
personal loan rate survey and find the best interest
rates in your area or call up a handful of local banks
and compare prices.
Ask if the interest rate is fixed or variable and what
the rate cap is. Also inquire about annual fees.
If you belong to a credit union, forget tips 1 and 2
and just go there. Interest rates on unsecured loans
can run about as much as one or two percentage points
lower than major banks.
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