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A rare form of financing
 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.
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.
But personal loans are still out there
at banks and credit unions for people with a sudden need for money
and a clean credit history, established employment and residency,
and a low debt-to-income ratio. They are sometimes even there for
a friendly local face the bank manager knows and just plain trusts.
If you are going to apply to borrow money,
check out these related Bankrate.com stories that tell you what
your rights as a borrower are, and what your lender's obligations
are:
-- Updated: March 19, 2004
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