Personal loans, or unsecured loans, often act as the placeholder for those with a big upcoming expense but little in the way of savings. They do not require borrowing against something of value, such as a house or car, which makes them particularly attractive for those without that kind of equity. However, that generally means the loans are available at a slightly higher interest rate than a home equity loan.
Personal loans are also locked in over shorter terms, like one to five years, and payments are auto-deducted from a checking account, which decreases the odds of missing a payment or defaulting.
From a financial responsibility standpoint, it feels like a semi-savvy way to take on debt, said Bankrates Albery.
Personal loans are well suited for smaller loan amounts than a typical home equity loan, but more than one would want to run up on credit cards — generally, anything up to $35,000, Albery said.