After the financial crisis hit, banks were more than reluctant to extend personal loans - but now that consumers seem to be getting their credit hacked by issuers, consumers are increasing their demand for personal loans. And according to a new SmartMoney.com report, a number of banks are happier to oblige than they've been in a while by extending several personal loan products.
Banks a Little Less Reluctant to Extend More Loans
Before the financial crisis, banks were more than happy to throw at you just about any type of credit extension, including credit cards and home equity loans. But when things got tough in the credit world - and homeowners flipped upside down on their mortgages - banks had to save themselves by tightening their financial reins.
The good news for consumers is that with banks getting more frugal with credit cards and home loans, they're becoming a tad bit more generous with personal loans; however, it may come with a cost. For example, Wells Fargo offers loan products that range from $3,000 to $100,000 and carry a rate between 8.5 and 26.25 percent depending on credit. These numbers don't seem to deter consumers, however, as the bank has registered double-digit growth in applications.
Can I Get a Personal Loan?
When seeking a personal loan, it's good to keep in mind that they won't be as easy to get as credit cards and home equity loans were once upon a time. For example, the Wells Fargo personal loan requires at least decent credit, regular income and an existing relationship with the bank (checking account and preferably savings or CD). This way, they can have an idea of how you manage your finances.
If you are in the market for a personal loan, Wells Fargo isn't your only option, of course. You could:
- Consider your community bank or credit union: Many big banks have shied away from personal loans because they currently have bigger fish to fry. But at your community bank or credit union (if you are already a member), they're a little bit more open to the idea of extending a personal loan. Just be prepared to have a face-to-face conversation about your income, sources of repayment, credit, purpose of the loan and more
- You might try peer-to-peer lenders: There are websites like Prosper.com and LendingClub.com that help consumers work with each other to borrow and lend. However, the loans are usually for smaller amounts to help decrease the risk to the lender. The rates you might pay will depend on your credit rating like with a bank. But overall, the standards tend to be a bit more lenient.
In your search for a personal loan, it's important to stay away from payday loans, which post APRs as high as 400 percent and advance-fee loan scams that "approve" a lender for an unsecured loan only after the lender pays some type of advance fee. If you're in need of money, it's good to have options available, but you don't want to risk losing the equivalent of what you borrowed just for a quick buck.
