The money is not rolling in, but at least there are signs that capital is defrosting, at small banks and credit unions, anyway. If you're in need of a loan, here is a loan primer to help you get started:
Personal loans are those typically under $5,000 and are meant for, as the name implies, personal use, meaning the home, family, or an emergency. They typically have a short approval period and a flexible repayment system. Options for personal loans include bank loans, peer-to-peer, and payday cash loans, which can be a controversial option.
are still difficult to come by in this icy loan market, especially if you have zero or bad credit. Stick with the small banks and credit unions, as a recent Wall Street Journal report (subscription required) found -- they're actually lending, even to those in sticky financial situations. Rates for loans vary depending on the lender as well as the borrower's credit standing -- the better the credit, the lower the rate.
Peer-to-peer loans are private individuals lending money, typically through sites like Lendingclub.com and Prosper.com. Interest rates average around 7% to 19% -- less on average than bank loans. A payday or paycheck advance loan covers expenses until the next paycheck, but these loans are frowned upon because they carry an average interest of 400% and are blamed for getting borrowers deeper in debt. States are increasingly cracking down on payday loans for this reason, so it's best to stay away from these loans.
Business loans typically come from banks, and small businesses can land one with the help of the Small Business Administration. The interest for a small commercial loan these days is around 8%, according to the Federal Reserve. Applications are notoriously lengthy and often require collateral. Banks will need to see financial statements, returns, a business plan (if you're a small business or just starting out), personal financial statements and personal tax records.
Private lenders are flexible lenders willing to work with the borrower based on the business plan and repayment needs. The Better Business Bureau is one of the best ways to meet a private lender, who will need to see a solid business plan and credit background, just like a bank. The big difference: Private lenders are not as risk adverse as banks. For first-time borrowers who have a hard time securing a loan -- as banks see the risk as too great -- there is hope in the form of being prepared and doing your homework on lenders. If you have a micro-sized business, you may qualify for a microloan -- the industry received a $6 million boost from the stimulus bill.
Car loans currently carry an interest rate of around 7% according to BankRate.com. Unlike most loan markets these days, auto loans are easier to come by thanks to initiatives to help the hurting automobile industry like increased lending by GMAC Financial Services. Consumers with great credit -- FICO scores between 720 and 850 -- can get an interest rate as low as 5.8%, according to the Wall Street Journal (subscription required). FICO scores under 660, on the other hand, as the WSJ points out, can bring in an interest rate of around 13.2%.
Given the student loan crisis in America today, students have the best success going through their on-campus financial aid for loans. While government backed student loans have a capped interest rate of 6.8%, private student loans carry heavier and sliding interest rates that turn into long-term . To understand how to consolidate , check out this exclusive WalletPop video featuring financial expert David Bach advising a recent graduate with $90,000 in debt.
Due to the implosion of the housing market, getting a home loan is even more difficult. And in this economy, paying off the existing mortgage is hard too, even with rates averaging around 5%, according to CNNMoney.com. In the latest news for homeowner relief, the government has launched a loan assistance program called the Home Affordable Modification Program (HAMP) to help lower mortgage payments. Find out if you qualify. And to find a home loan that's right for you, go to BankRate.com to compare rates in your area.
Personal loans, home loans and others starting to thaw