Think carefully before taking on personal loan debt

Personal loans are the fastestgrowing debt category in the country. The outstanding amount has nearly tripled, growing from $55.3 billion to nearly $160 billion in the last decade. Just as in every other industry, technology has made all the difference, with Fintech companies creating algorithms that can make instant credit decisions.

The result is personal loans that may carry much lower interest rates than credit cards. In fact, a new survey by Lending Tree shows that twothirds of all personal loans taken out in the past year were for either loan consolidation or credit card refinancing

borrower with a good credit score can get a loan up to $50,000, but the average loan is far smaller. Lending Tree says members of Generation X take out the biggest loans, with an average amount of $9,722. About 19 million people have a personal loan, while 176 million people have a credit card.

The report shows the average annual percentage rate paid on personal loans by borrowers with good credit (760 or above) was 10.19%. However, those with scores between 640 and 680 paid as much as 25% in interest, and rates on sub-prime loans can be even higher.

Many companies offer loans online because they can almost instantly assess your likelihood of repayment.

It pays to shop around, because you could see as much as a 10-point interest rate differential in quotes from different lenders, given the same credit and loan information. To make that search easier, several companies aggregate loan offers. LendingTree.com, CreditKarma.com and Credible.com are three of the most widely used sites.

You fill out an online form at these sites to get the process started. It's not a loan application; the information is used to assess which lenders might be interested in making a loan offer. Although you provide your address and birthdate and Social Security number, this is not listed as a credit inquiry on your credit report. The industry calls it a soft pull. You'll also be asked the purpose of the loan.

Then, within seconds, the company can provide a list of pre-qualified offers from various personal loan lenders. The rates and terms will vary. If you're interested in one or two, you can click to be taken directly to the lender's website, where you will be asked to fill out a loan application online. The lender will respond quickly, and if you are approved, you can expect to receive the money transferred to your bank account in as little as 48 hours.

The lender will ask for an ability to automatically draft a monthly repayment from your bank account. That will lower your rate significantly. And if you fail to repay on time? This is an unsecured loan, so a lender can send your account to collection — just as would happen with a credit card balance. And the lender can always garnish your wages if it gets a court judgment against you.

And even if you do qualify for an affordable loan, remember the old adage: If you want to get out of a deep hole, stop digging. Taking on more debt — even less expensive debt — is not the road to prosperity. And that's The Savage Truth.