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