Unsecured loans are costly. The interest on an unsecured personal loan is currently over 15% per year, says BankRate.com, assuming you can get any loan at all in today's credit-starved environment. And that's about your best such rate. Attempt to borrow against a credit card, for example, and it could be a good deal more. It's obvious that personal loans can get very expensive nowadays.

In emergency situations, though, a personal loan is just about unavoidable for many of us. What if the car won't start and you need an expensive engine repair to get it up and running again? Or your daughter needs braces? Or the washing machine breaks down?

When situations like these occur, many Americans resort to personal loans, including high-cost payday loans. Such loans now make up over 22% of the total non-mortgage installment loans at U.S. banks, up from only 11% in 1998.

But before you sign up for your next personal loan, consider the following options you might not have thought of --

- Consider a home equity loan. If you own a house with equity in it, you can probably borrow against the equity at a fairly low interest rate and at the same time get a tax deduction. Check out LendingTree.com for a list of lenders.

- Selling stocks, Treasury bonds, etc., can be a fast way to drum up some hard cash - just be sure you understand you'll have to pay taxes on any gains or interest.

- Try borrowing against your retirement account. Ask your employer's benefits department if this option is available. If so, it's another low-interest alternative.

- Try borrowing against your retirement account. Ask your employer's benefits department if this option is available. If so, it's another low-interest alternative.

- Family or friends. Maybe your dad can fork over some cash. Just make sure you pay him back.

- Ask your creditors - particularly local merchants who may be more flexible - if they're willing to extend your payments a month. If they are, make sure you're not getting charged extra for the privilege of paying your bill late - or if you do get charged, determine how much.

- How about asking your employer for a pay advance - assuming of course you have an understanding employer.

Good Debt and Bad Debt

You need to recognize a simple fact of personal finance: Never borrow money for consumption. That's bad debt. Only borrow for investments that will increase in value (and increase by more than the cost of the loan). Borrowing money just in order to spend it is a terrible idea, a royal road to bankruptcy or other financial land mines. As Eric Tyson says in his book, PERSONAL FINANCE FOR DUMMIES:

If you spend, say $2,000 [which you've borrowed] on a Caribbean vacation, the money is gone. Poof! You may have fond memories and even some Kodak moments, but you'll have no financial value to show for it... I'm not saying don't take a vacation. Definitely, take one, two, three, or as many as you can afford yearly. But that's the point - what you can afford. If you need to borrow money... [then you can't afford the vacation]...

And precisely the same advice applies to almost any consumer purchase: home computers, expensive meals, clothes,, yes, even a new car - anything that decreases in value and eventually becomes financially worthless. If you have to borrow to buy it, you probably can't afford it. According to Tyson "The financially correct amount of bad debt [you should have] is zero."

But this advice does not apply to things that "retain and hopefully increase in value over the long term, such as an real estate, education or your own business." For these uses, debt is acceptable, up to a limit - the limit being the point at which making payments causes you to be no longer able to save sufficiently to accomplish your financial plans.

All that is good advice, but let's face it: At times, you simply may not be able to avoid adding to your debt load - an emergency or other urgent situation forces you to seek a personal loan. In those kinds of situations, what are your best options?

Essentials of Personal Loan Essentials

Here are a few basics to keep in mind whenever shopping for an unsecured personal loan:

First, never borrow more than you need. Given the high interest rates in today's credit environment, you'll want to keep the amount to an absolute minimum.

Second, compare terms from several lenders. Never look at just the monthly payments - consider the total cost of the loan, including any hidden charges like credit insurance or other fees. Don't skip the small print on the loan agreement. Don't assume what you're being told by a loan officer is binding. It's what's in writing in the contract that counts.

Third, start by trying your credit union before a bank. Credit unions usually have more favorable terms than banks and are often willing to make small unsecured personal loans to their members.

Fourth, don't pledge valuable personal assets when you take out a small loan - it's almost never worth the risk. And avoid using credit cards or payday loans if at all possible - the interest rates, especially on the latter, can be prohibitive.

Fifth, remember that the interest you pay on unsecured personal loans is not tax deductible.

Subprime Loan Pitfalls

If you find yourself in the subprime lending category, things get even more complicated. As you know, subprime lending has tightened up greatly over the past months (and is now almost nonexistent in the mortgage market). However, if you are employed, you can still find cash in an emergency - you just have to be prepared to pay a steep interest rate for it.

But exactly what does the term "subprime" mean? The definition varies by lender, but in general terms subprime means a FICO score of 650 or below. Among the other criteria commonly used are: a bankruptcy within the past five years, a foreclosure within the past 24 months, or a debt-to-income ratio of 50% or higher. Some highly conservative lenders will even brand you as subprime if you've been late on one or one or two credit card payments over the past 12 months.

There are some important factors to bear in mind if you're considered subprime and yet need to take out an emergency personal loan. One is to recognize that you won't be viewed the same by all lenders - so you don't have to jump at the first offer you receive. Shop around. As said, be sure to try your credit union first - and also one or more banks that have departments providing subprime lending. Try using one of the online services that allow you to apply at several lenders simultaneously, like Lending Tree

Here are a few important points for subprime borrowers to bear in mind:

Never put valuable assets at risk in order to make a small loan.

Avoid "fancy" loan terms such as balloon payments. Avoid adjustable rate loans (these have proven disastrous for thousands of subprime mortgage borrowers and can be almost as disastrous for personal loan borrowers).

Don't allow several lenders to access your credit report at the same time. Several inquiries on your credit report within a short period can further lower your credit score.

Don't allow several lenders to access your credit report at the same time. Several inquiries on your credit report within a short period can further lower your credit score.

If possible try avoid payday loans altogether except as an absolute last resort, and even then only use them on rare occasions - never more than once a year. They entail phenomenal interest rates. Payday loans have burgeoned into a billion-dollar industry in the U.S. but they can be ruinous to your financial health.