Need a $12,000 Loan

Bill's Answer: Bills.com Resident Expert

Before I explain your options for a loan, I want to take your thinking in a different direction for a moment. If your debt is unsecured, such as credit card debt, perhaps another loan is not your best solution. See the Bills.com resource Debt Relief Options: Which is Right for You? to learn how to resolve debt without a loan.

Finding a Loan

If you do not have any collateral, what you seek is a signature loan, which is also called an unsecured loan or personal loan. Personal loans are risky for lenders due to their lack of security and relatively high default rate. Therefore, most lenders charge high interest rates on personal loans, especially those for people with a checkered credit history.

You may find that using an unsecured personal loan to consolidate debt can actually cost more than continuing regular debt payments. Depending on your financial situation, there may be a few alternatives to a traditional personal loan that could assist you in resolving your debt.

I have five suggestions for you. First, read the Federal Trade Commission document, "Payday Loans Equal Very Costly Cash: Consumers Urged to Consider the Alternatives." You may not be considering a payday loan (I strongly discourage payday loans), but the FTC's suggestions are sound and I recommend reading this document to determine if any of the suggested alternatives to payday loans will work for you.

Second, consider a loan from a peer-to-peer (p2p) lender. P2p loans are, as the name suggests, loans between people that are mediated by a third party. In some p2p loans, the borrower writes a proposal and investors choose whether to fund the loan. In other p2p loans, an intermediary funds the loan, combines the loan with others, and sells shares in the loans to investors. I know of three companies facilitating peer-to-peer loans in the US today: Prosper, and Lending Club. (Readers: If you know of others please comment below.)

Consider a p2p loan as an alternative to bank financing.

Third, if you have a 401(k) account, ask your 401(k) plan administrator if loans are allowed under your plan. Not all plans allow loans, or limit loans to certain circumstances. I do not recommend taking a hardship distribution from a 401(k) account unless your situation is dire.

Fourth, visit the Bills.com Loan Resources page to find out more about the loan options available to you.

Fifth, if you own a home, you may want to consider a mortgage refinance to tap into the equity you have in your home. Bills.com makes it easy to compare mortgage offers and different loan types. See the Bills.com mortgage refinance savings center to get no-cost quotes from up to four pre-screened mortgage lenders.

Recommendation

You mentioned securing a loan with your vehicles. This is called a title loan, which is allowed under law in many states. I urge you to consider an alternative. Title loans are very expensive. Also, Bills.com readers have told me that title loan lenders are very aggressive in collecting these loans. Missing a payment means repossession of your vehicle, and I do not need to give you parade of horrible outcomes if your vehicle is taken from you.

Consider bankruptcy or your other debt resolution options.

I hope this information helps you Find. Learn & Save.

Best,

Bill

Bills.com

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