Where Can I Get Personal Payment Loans?

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Personal payment loans, or simply personal loans, are small lines of credit or closed-end loans. These loans are often short term, and used for small purchases. Since most personal loans are unsecured, they also carry higher interest rates than secured loans (like mortgages or car loans). Obtaining these loans is quite simple, so long as you can meet the minimum credit and income requirements.

Banks

Local banks often offer the best interest rates on personal loans. Be sure to check with your local community credit union and bank before seeking financing at one of the massive lending conglomerates. In addition to lower rates, often these lending institutions will provide more attentive service on the loan.

Finance Companies

Finance companies--like HSBC, CitiFinancial, and Wells Fargo--all offer unsecured personal loans. In most cases, there is a cap on the loan amounts (usually no more than $10,000). Consumers have the option between revolving loans (like credit cards) and closed-end loans, which work like a car loan. Borrowers who struggle with debt should strongly consider the closed-end variety as, unlike a revolving loan, it offers a definite expiration date.

Peer-to-Peer Lending

Peer-to-peer lending is a relatively new concept. The idea is to skirt the banking institutions and instead use funds from private citizens. One of the organizations involved in peer to peer lending is Lending Club. In order to qualify for one of these loans, you'll need to prove your FICO (credit) score is above 660, your DIR (Debt to Income) ratio is less than 25% (excluding your mortgage), and you are a U.S. Citizen. To calculate your debt-to-income ratio (DIR), divide all your monthly bills by your gross income. For example, if you have $1,300 in bills each month, and you earn $6,000, your DIR is 22%--and therefore you are qualified for a peer-to-peer loan.

Private Loans

Private loans are neither bank loans nor peer-to-peer loans. They instead are privately handled transactions usually between family members, colleagues, or friends. It's best to have an attorney draw up the legal paperwork if you decide to take out a private loan.

Warning

Beware of any lender who attempts to force you into a loan product. Do ample research prior to obtaining a personal loan. At the end of the day, you'll need to choose the loan that best serves your interests, not the lender's. In addition, draw up your own budget to make sure you'll be able to carry a new monthly payment.

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