Personal Loans Becoming Scarce

Online, January 17, 2011 (Newswire.com) - Just a few decades ago, one of the most accessible ways to finance a big purchase, meet an unexpected expense or consolidate other debts was the personal loan. Then came credit cards and home equity loans, which were easier to get and tax deductible.

Banks liked credit cards and home equity loans. They were easier to underwrite and cheaper to manage.

But the real estate crash and credit crunch vaporized home equity and credit card loans. Now nearly 25 percent of American homeowners owe more on their mortgages than their homes are worth, and credit lines have been cut by credit card issuers, a trend expected to continue through 2012.

These trends are giving new life to the demand for personal loans. But not all banks offer unsecured personal loans. In fact, many of them rarely, if ever, extend signature loans. For them, credit cards have basically eliminated the need for personal loans.

The banks that do offer them don't give them away like they once did with credit cards or home equity loans. Many require prime credit and an existing relationship with the bank, as well as regular income. This means that if you are out of work and need some help making ends meet, a personal loan isn't for you.
So if you don't qualify for a bank personal loan or if you have bad credit, where do you turn? Many people in those circumstances turn toward cash loans. This type of loan doesn't cost you much up front - you pay a fee and the money is due to be repaid in two weeks. But this type of loan can become a trap for those who cannot afford to repay the loans when the time comes. These folks continually renew the loans, paying the fee each time.

So if you can't qualify for a personal loan with a bank or have bad credit, take a look at your personal financial situation. Chances are if you can't repay a bank loan, you can't repay a cash loan.
But if your situation is such that you can repay the cash loan in the allotted time, this type of unsecured loan can be a viable option in an emergency or when an unexpected expense occurs.

But you should take a long hard look at your books first - then decide.