Where to Get a Small Personal Loan

You can use a personal loan to help pay down debt.

A personal loan can help when you have more expenses than the money needed to pay them off. You might need the loan to pay your mortgage, consolidate credit card bills or take a vacation. Several options exist for securing a personal loan, but the options available to you depend on your situation. Lenders generally base their decisions on your employment status and credit history.

Commercial Banks

Commercial banks offer personal loans in some cases. Personal loans fell out of favor when credit cards and home equity loans became available. Some banks decided personal loans were too risky and offered little in return. However, some banks continue to offer the loans. You need an account, such as a checking account, a savings account or a certificate of deposit. It helps if your account is old enough to show that you've handled your money well over the years. MSN Money reports that you shouldn't approach banks for a loan if you're unemployed and are struggling to pay bills. Good credit history is also mandatory before banks will consider you for a loan. Other non-bank options are available if your bank doesn't offer personal loans or if you fail to qualify.

Credit Unions

Credit unions are financial institutions, but they aren't banks. According to the Credit Union National Association, unions consist of groups of people that pool their assets to provide financial services and loans to each other. You cannot apply for a credit union loan unless you become a member. Members share a bond, for example everyone might work in the same industry, attend the same school or live in the same community. Unions offer lower loan rates, more savings and fewer service fees than banks because there are no shareholders to pay. Credit unions are supervised and monitored by the National Credit Union Administration, and the money is insured by the National Credit Union Share Insurance Fund. For information on finding credit unions in your area, contact the Credit Union National Association.

Pawn Shops

Pawn shops offer personal loans in exchange for some form of collateral. Common collateral items include jewelry, televisions, cameras, guns and just about anything else of value. When you pawn an item, you receive a ticket that shows the item you pawned, the amount of your loan and when your payment is due. Pawn shops aren't as particular about credit history or employment record. According to the National Pawnbrokers Association, these types ofcollateral loans are beneficial because failure to repay the loan doesn't hurt your credit score or result in any legal consequences. If you fail to repay the loan, the pawn shop simply sells your item to recoup the cost of the loan. The amount of your loan depends on the worth of the item you pawn. If you don't own anything worth the amount you need, then a pawn shop loan probably won't serve your needs.

Family Members

Family members can provide you with a personal loan. You won't have to worry about a credit check or your employment history. However, there are other considerations involved. Forbes.com suggests creating a formal agreement even when borrowing money from family. The agreement should specify the amount of the loan, the interest charged and the repayment terms. If you fail to sign a formal agreement, future disagreements over the loan could arise. Getting the agreement in writing also helps you avoid tax trouble. Without a formal loan agreement, the Internal Revenue Service might argue that your loan is a gift subject to gift taxes.

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