Personal Loan Applications Rise at Some Banks

[Dec 11, 2009.]

 

More people are applying for personal loans as banks have become extra cautious about extending credit in the form of credit cards and home equity lines. But not all banks offer personal loans, and when they do the deals may come with some restrictions.

Loan Applications Increase

Applications for personal loans had double-digit growth at Wells Fargo, according to SmartMoney. The bank offers loans that range from $3,000 to $100,000. Personal loan rates can reach as high as 26% depending upon a borrower's credit. Wells Fargo also requires borrowers to already have an existing account at the bank, such as a checking or savings account.

Tough Requirements

Some banks don't offer personal loans. In many cases, credit cards took the place of personal loans years ago. But because lenders are reluctant to issue new credit lines, some people seeking a small loan or credit card are out of luck. Anyone who manages to qualify for a loan usually needs to have a steady income, good credit, and a manageable level of debt.

What Is the Money For?

Borrowing money is never ideal for people who already have debt. Anyone who decides to get a loan should look at several factors:

• What is their current debt-to-income ratio? Many lenders are reluctant to loan money to people who use more than a third of their income for debt payments.


• Have they already maxed out other credit lines? Getting a loan at this point is simply pushing them deeper into a debt hole that may be difficult to get out of.


• What is the purpose for the loan? Borrowed money should not be used for frivolous purchases.


• What deals on loans are available from different banks? Borrowers can search for personal loan quotes here.

Personal Loans from Other Sources

Perhaps getting a loan from a traditional bank isn't the best move. Other alternatives for getting money include borrowing from a friend or relative. Virgin Money can help people set up formal loan agreements with others who agree to loan them money.

Individuals looking for money also may find success getting loans through a social lending network like Lending Club. Peer-to-peer lending sites set up formal agreements between borrowers and strangers who agree to help them. Requirements aren't as tough as at most banks, but generally people still need to have good credit to get investors willing to loan them money.

 

About Author:

Francine L. Huff is a freelance journalist and the author of The 25-Day Money Makeover for Women. She has appeared on a variety of TV and radio shows.