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Fast money -- at a price
 Unsecured
personal loans can really help in a pinch. If your savings are low
and your car breaks down, or it's Mom's birthday next week and your
tuition is due the same day, such a loan can patch up your life.
Or maybe you're going to be buying a big-ticket item with a check
and you need backup money to cover a short-term hole in your bank
account.
Part of their convenience is how quickly
they can be approved -- usually in one banking day, three tops.
Financial institutions don't care much
about how you use an unsecured personal loan as long as you are
a good candidate to pay it back.
"One of the features is that they
are the least-strings-attached type of loans," says Bill Hempel,
chief economist for the Credit
Union National Association in Washington, D.C. "Typically,
the purpose is not of any interest to the lender."
The hitch is that because the borrower
has no collateral, unsecured personal loans are more expensive.
The average interest rate is higher than a home equity loan. (To
see what rate you'll pay, check out Bankrate.com's current
national survey of nationwide loan rates. And unlike home equity
loans and lines of credit, unsecured loans are not tax-deductible.
Even credit cards can be cheaper than
unsecured loans. To be completely thorough, check Bankrate.com's
current credit
card rate information before you make your personal loan move.
And remember, besides interest, you commonly
have to pay an annual service or maintenance fee on the loan that
is either a flat fee or a percentage of the lump sum.
-- Updated: March 19, 2004
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