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Looking for a little extra cash? Some consumers who find they need a small amount to fix the car, buy a new washing machine or make a down payment on Junior's braces are passing up home equity loans or credit card charges in favor of small, closed-end, unsecured loans.
Years ago, it was not unusual for someone to walk into their local bank and borrow $500 to get their car fixed or buy a new washing machine. Banks would commonly grant unsecured "character" or "signature" loans to people whose good name in the community was enough of a guarantee of being paid back.
If you apply for such a loan today, your banker is likely to hand you a credit card application and send you on your way. The massive proliferation of credit cards, which are a form of unsecured loan, and changes in the IRS code in the mid-1980s that eliminated tax deductions for many consumer interest payments, have made unsecured personal loans much less common. Those tax changes drove people to home equity loans to buy consumer goods because, in most cases, they still got the deduction.
But personal loans are still out there at banks and credit unions for people with a sudden need for money and a clean credit history, established employment and residency, and a low debt-to-income ratio. They are sometimes even there for a friendly local face the bank manager knows and just plain trusts.
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