According to an article on CNN Money this week, interest rates on various loans, including personal loans, has been on a steady upward climb since the economy has begun to heal. Although mortgage loans have experienced the quickest rise in interest, personal loans and credit cards have also seen a slow and steady upward climb over the past year. When the recession hit, the amount of personal loans granted by financial institutions took a dive, as most lenders were unwilling to assume additional risk in already troubled times. Even though interest rates remained somewhat low (hovering around 10%), a personal line of credit was difficult to qualify for or even find at your local bank or credit union.
Personal Loans and Banks
Personal loans remain difficult to obtain from banks, especially if you are looking for an unsecured line of credit. Secured personal loans offer less risk to the lender but are still difficult to obtain. Usually lenders and borrowers have very different opinions about the value of the collateral being offered. If you are planning on offering collateral, it’s wise to take a professional appraisal with you to the bank, so that you can have expert testimony that shows your item’s value. If you are seeking unsecured credit, you can improve your chances of approval by asking for a smaller amount or a longer payoff time.
Personal Loans through Peer-to-Peer Lending
During the recession, the peer-to-peer lending industry grew, as a way to obtain a personal loan without using a traditional financial institution. This method of obtaining a personal credit line remains popular even as the economy appears to be on the mend. In this scenario, you can apply for a loan on a peer-to-peer lending website and an individual or group can decide to grant your loan based on a variety of factors. Because peer-to-peer lending is less formal and even friendlier than going to a traditional financial institution, many borrowers are seeking it out as a way to get the extra cash they need.
Personal Loans from Friends and Family
During this recession, the amount of personal loans obtained from “The Bank of Mom and Dad,” has grown exponentially. As family members and friends lose their jobs, face foreclosure, and experience other dramatic financial crises, loved ones are stepping in more and more often to fill the gap left by traditional financial institutions. The problem with family lending is, of course, the potential for disaster that comes of mixing personal relationships into a business transaction, but as long as the economy remains shaky, people will continue to go to loved ones for help.