It's happened to everyone: Some unexpected expense pops up, and you don't have the cash to handle it. Your first instinct might be to reach for that credit card, or call Aunt Betty to ask for a loan. However, neither of these options is ideal. The answer may lie in heading to a local lender and applying for an unsecured personal loan.
Personal loan basics
A personal loan is a monetary advance made to you usually from a bank, credit union or finance company. Most personal loans are unsecured and carry a fixed interest rate. Maturity terms can vary widely, depending on the lender-some programs are as short as six months, and others as long as 10 years. The right time period for you will depend on how much money you need to borrow, what the interest rate is, and what you can afford to pay back each month. In addition to banks and credit unions, online banks and lending websites are also great resources to use for these types of loans.
It's always important to compare apples to apples when applying for a personal loan. Request written proposals from at least three different lenders, and compare each on the following:
* Interest rate (Compare this to the cash advance rate on your credit card, too.)
* Annual fees
* Restrictions on prepayments
* Length of repayment schedule
Scam Protection
Personal loans fall under the credit practice regulations administered by the Federal Reserve Board and the Federal Trade Commission. Unfortunately, the existence of regulations banning unfair or deceptive credit practices doesn't keep everyone on the straight and narrow. Ultimately, your best protection is shopping around and comparing the terms of several different lenders.
If you need money, don't pull out your credit card. And leave dear Aunt Betty alone. A little research may prove that a personal loan will provide you the funds you need with a structured repayment schedule that you can afford.
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