If you have no or poor credit background, a consumer finance company may be an option. Unlike banks and savings and loan associations, these finance companies borrow money from other sources and then lend that money out to the consumer. The spread, or difference between the interest rate that the finance company pays to borrow the money and the interest rate the company charges you, needs to be large enough for the finance company to profit, so the interest rate that finance companies charge is much higher than the rate that a bank or S&L charges. Consumer finance companies also tend to approve smaller loans than other institutions.

If you have little or poor credit history or are borrowing without collateral (security pledged for the payment of a loan), you pay a very high interest rate at a finance company. The company is taking on a greater risk with your loan and needs to build in provisions for collection costs if you default on the loan. If you can pledge collateral for the term of the loan, negotiate for a lower rate.

Before applying with a finance company, do your homework. Try to find something of yours that you can put up for collateral, and check your credit report for positive accumulated credit. If either of these options is available, apply for your loan at a bank or a savings and loan and discuss different options with them.

If you have a relative or friend who would cosign or pledge collateral for you, try that avenue before committing to the high interest rates of a finance company.

To view our list of most recommended Loan companies online, visit this page: Loan . Jean Robbins is the owner of Loan website, an informational website about various types of loans.