by Denise Gabbard

Created on: September 12, 2009   Last Updated: September 17, 2009

Just a few years ago, I would have voted a resounding "NO" on this question! The interest rates are much higher than someone with good credit would pay, almost all require collateral, and the terms are very restrictive. When taken together, not a great deal for any consumer.

However, our economy has changed so much that there is a definite need for this type of loan. Many people are laid off and facing circumstances much more dire than paying high interest rates. Nowadays, many families struggle just to put food on the table for their children, and a lot of extended families are in no position to help. Getting a personal loan might mean the difference between paying this month's rent or being evicted.

Of course, it still pays to be as prudent as possible and check with a few sources before accepting a loan. The important things to know are: interest rate, terms (how long do you have to pay it back,)and if there are pre-payment penalties (penalties for paying it back early.)

There are small loan companies all over the country (such as CitiFinancial, etc-generally in strip shopping centers)in the business of giving small personal loans, who understand credit blips and who you can talk to about a loan. These lenders generally will overlook your credit if you have something of value to use for collateral- a car that's paid for (which they can hold the title on until you pay them back), jewelry, any sort of collection that is valuable, etc. The interest rates will be steep, so be sure to ask if there are any pre-payment penalties so that you can pay it back as quickly as you can to save money without paying an extra fee. These lenders are good ones to establish a relationship with, as lower rates are generally offered for repeat customers.

If you can get by with a small amount of money, your small local bank or credit union might be able to help. If you already have an account with them and know the people there, that should also work in your favor. With credit issues, they most likely won't be able to help with a large sum, but most managers will have a discretionary amount they are allowed to decide upon.

I absolutely do not recommend so-called "Payday Loans" because the fees they charge you are ridiculous- you often will pay 30% or more, and they will only "loan" you a few hundred dollars. You might think they are doing you a favor when they push back the date your payment is due, until you realize they are charging you even more to do that. These places should be avoided at all costs! A good alternative to these loans is your local pawn shop, if you have something of value. They give you cash for the items and hold them until you pay back the loan. But do be aware of the deadline when you need to have it paid off, or you can risk losing your collateral.

When you need money and your credit has taken a hit, be cautious when applying for any loan. Read the fine print, ask questions, and don't be afraid to walk away if you can't live with the terms.

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