Editors' Pick: Originally published Feb. 19.

Hey, we're taking out personal loans again! That's... a little frightening.

According to Bankrate, 24 million Americans are likely to take out a personal loan this year. Those are unsecured loans that do not require collateral like a house or car. While they're used for home improvements, debt consolidation and other purposes, one of their more common uses is for emergencies, and some of their more common users are younger applicants.

“I think the actual number will be even higher,” said personal loans expert Todd Albery, chief executive of Quizzle.com, a Bankrate company. “A lot of people don’t plan for a personal loan until their roof leaks or their car breaks down. Since three in ten Americans have no emergency savings whatsoever, they’re just one unplanned expense away from needing cash in a hurry.”

That “no emergency savings” revelation is especially noteworthy with TransUnion, which pointed out that the number of U.S. consumers taking out personal loans has increased 18% since 2013. Meanwhile, by the third quarter of 2015, according to the Federal Reserve Bank of New York, total U.S. credit card debt hit $714 billion (up $34 billion from a year earlier), auto loan debt stood at $1.05 trillion (up $111 billion), student loan debt was a whopping $1.2 trillion (up $77 billion) and mortgage debt stood at $8.26 trillion (up $129 billion).

Even Bankrate acknowledges that despite rates hovering around 5.5% for people with good credit, personal loans typically are reserved for folks who are running out of options. Bankrate suggests home equity loans and lines of credit for people who own a home and have equity to fall back on (and Americans are on the hook for $492 billion in home equity loans right now) and recommend a 0% interest transfer credit card for those who don't own a home, but have good credit. Why? Because Americans, especially younger ones, have a tough time dealing with debt as it is.

Finance site NerdWallet compiled its American Household Credit Card Debt Statistics Study last year and found that median household income has grown 26% since 2003, but medical costs grew by 51% during that same span. Meanwhile, food prices are up 37% during that time.

Meanwhile the average household is paying $6,274 in interest alone, which means that 9% of average household income ($72,641) is being spent just on interest. It doesn't help that the average American household with credit card debt is facing 44 years of payments if making only the minimum payment on their debt each month.

The news is worse from the folks at CreditCards.com, whose survey found that more than one in five Americans with debt (21%) believe they will never pay them all off -- up from just 9% in 2013. The average age that Americans expect to be free of all debt -- including credit card debt, car loans, student loans, mortgages -- is 54. Yet, credit-card- and student-loan-debt-ridden Millennials are more optimistic, with only 11% saying they'll never be debt free.

“While it’s great to see more people freeing themselves from debt, the fact that more and more people still feel trapped and hopeless means that Americans still have a major problem with debt,” says Matt Schulz, CreditCards.com’s senior industry analyst. “Hopelessness can be paralyzing, but the reality is that people have more power of their debt than they realize. The most important thing is simply to take action – even small ones – to start knocking that debt down.”

For starters, Schulz suggests creating sensible budgets and tracking all expenses. Melinda Kibler, a certified financial planner with Palisades Hudson Financial Group’s Fort Lauderdale, Fla. office, agrees and suggest that creating a budget and going through expenses can reveal your spending habits and help you pinpoint where you can reduce spending. Otherwise, she says, you’re likely to reach the end of the year without having saved and not knowing why.

“Without a formal budget, you’ll be too lax and won’t reach your goals,” Kibler says. “Once you’ve set your goals and built a budget to reach them, you’re on your way.”

The next step is reducing debt. Kibler suggests starting with loans carrying the highest interest rate first. That's typically credit card debt, which Schulz says can be wiped out by transferring it to a 0% interest credit card or negotiating a better rate on your existing cards.

From there, Kibler says you can use the payments you were making to pay off your debt to build up your savings and cover six to 12 months of living expenses in case of an emergency. If you don’t have to tap into the emergency fund, it will eventually become part of your retirement nest egg, which is kind of a big deal for debt-laden Millennials. Of the 74% of Millennials who financial firm Franklin Templeton says are considering working during their retirement, 30% think they won't be able to retire at all.

“A good rule of thumb is to have an emergency fund that covers at least six months of expenses,” says Anthony Crisculolo, certified financial planner, enrolled agent and portfolio manager with Palisades Hudson Financial Group's Fort Lauderdale, Fla. office. “If you are older and/or have dependents, you may want to be even more conservative and build up 12 months of expenses.”


However, if things get more bleak than even your emergency fund can handle, Criscuolo notes that there are several steps you should consider before taking out a loan. First, make an emergency budget in advance. If you already have a standard budget that factors in your normal income and expenses, take a look at non-essential expenses that can be cut or reduced in an emergency and make a low-expense budget based on those trims. Secondly, keep your credit clean so a 0% interest credit card or home equity loan is an option. An emergency line of credit still isn't ideal and should be reserved for actual emergencies, but it can provide you a low-rate cushion until you're able to level things out again.

“While it’s never ideal to go into debt, if you are truly in an emergency and your cash runs out, using debt may be your only option,” Criscuolo says “But it may be too late to apply for a credit card with no income and no assets, so having one or two backup lines of credit in place before an emergency is a good idea.”

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.