Remember the personal loan?

A few decades ago, it was one of the most accessible ways to finance a big purchase, unexpected expense or consolidate other debts. Then came credit cards and home equity loans. Easy to get, even easier to tap and tax deductible (in the case of home equity), they quickly trumped unsecured consumer loans, which often required an applicant to walk into a bank branch, bare their financial soul to a loan officer and jump through hoops to qualify.

Banks liked credit cards and home equity loans, too. They were much easier to underwrite and cheaper to manage. Up until a couple of years ago, most big banks would actually hand you a credit-card application if you walked in asking for a consumer loan that was on the smaller side, says Gerri Detweiler, a credit adviser for the consumer information web site Credit.com.

But the real estate crash and credit crunch vaporized home equity and credit-card lines alike. Now, nearly one in four American homeowners owe more on their mortgages than their homes are worth, according to First American CoreLogic. And in 2008 and 2009, credit-card issuers have cut $1.5 trillion from consumers available credit lines, according to research firm TowerGroup and will continue to cut through the end of 2012.

These trends are giving new life to the demand for personal loans. For example, in the past year, applications for Wells Fargo personal loan products have registered double-digit growth. The loans, which can range from $3,000 to $100,000 and carry a rate between 8.5% and 26.25% (depending on one s credit history and relationship with the bank), are marketed as a debt consolidation vehicle. We feel really good about [our product], says Brent Vallat, the business manager for personal credit management at the bank. It s the right product for the times and it s a disciplined way for consumers to take control of their debts.

Not all big banks offer unsecured personal loans. For example, JP Morgan Chase has rarely, if ever, extended personal loans. The credit card has basically eliminated the need for personal loans, says spokesman Tom Kelly.

The banks that do offer personal loans don t give them away like they once did credit cards or home equity lines. Wells Fargo, for example, requires prime credit and an existing relationship with the bank, Vallat says. That means you d a need to have a checking account with the bank, and ideally something else (a savings account or CD, for example) to help give the bank a clearer idea of how you manage your finances and your ability to repay the loan. And make no mistake: A regular income is mandatory. (If you ve been out of work and need some help making ends meet, a personal loan isn t for you.)

Bobby Britting, a research director in TowerGroup s consumer lending service, says that personal loans, a market estimated at $100 billion and a drop in the bucket compared to the market for credit cards and home equity, could represent too much risk for too little pay to be worthwhile for most big banks. Just managing it across 50 states for not as big of a portfolio it s a lot of work, she says. You can almost understand why, at this point when lenders need to focus on big things, they would say this is a niche market that we d rather not deal with right now.

If you re in the market for a personal loan, you have several options. Here are two to consider and two to avoid.

Consider: Your community bank

Even as the big banks have curtailed lending significantly, business goes on as usual at most community banks. And that means offering personal loans to qualified customers. Community banks have always had their door open for consumer loans, says Michael Menzies, the chairman of the Independent Community Bankers of America and president and CEO of Easton Bank & Trust, a community bank in Easton, Md.

When applying for a personal loan, expect the old-fashioned drill. We make [these loans] by sitting down, one on one, face to face with the borrower and taking the application, discussing the income, the sustainability of their income, their sources of repayment, their debts and the purpose of the loan, Menzies says. The terms of each loan will vary greatly, depending on the borrower s credit, relationship with the bank (encouraged), income (pretty much mandatory), the purpose of the loan and its term. Generally, expect rates to range from 5% to 12%.

Consider: Peer-to-peer lenders

Peer-to-peer, or p2p, lending web sites like Prosper.com and LendingClub.com enable consumers to be both borrowers and lenders. If you have extra money to spare, you can consider lending to a consumer in need, with the option of spreading your risk by lending very small amounts (say, $50) to several different borrowers. Each borrower includes with their request a personal profile (not unlike those at a dating site), which explains why they need the money and how they plan to use and repay it. Rates vary depending on the borrower s credit rating. At LendingClub.com, they range from 7.05% to 21.21% and at Prosper.com, from 8.65% to 25.6%. (For the basics on navigating p2p lending sites, click here

For more on the tax consequences, read our story The Tax-Smart Way to Lend to Loved OnesVirgin Money sells loan servicing and documentation kits for individual loans for $99.

Avoid: Payday loans

Many bad-credit consumers turn to payday loans because they don t qualify for a loan from a bank, credit union or even a credit card. These loans don t cost much upfront -- you pay a fee of $50 or so for a loan that typically ranges from $300 to $500 and must be repaid within two weeks. But they can put you in debt trap, according to the Center for Responsible Lending, a consumer advocacy group.

In a reportThe payday lenders industry trade group, the Community Financial Services Association of America, argues that the data and conclusions in the CRL are wrong. Read their arguments here

Avoid: Advance-fee loan scams

As more people go online to look for personal loans these days, scammers proliferate. Credit.com s Detweiler says she hears every week, and sometimes daily, from people who have been tricked into paying advance fees for personal loans that never materialize. Typically, the borrower is approved for an unsecured loan on the condition that they send a credit insurance fee or make the first three payments before receiving the loan. For more on the red flags, read our story, A Tempting Loan Offer to Be Wary Of.