High Risk Personal LoansPosted on September 1st, 2010 William No comments
Getting a loan is difficult enough in this economy, but when you have lousy credit, it's even worse. Many legitimate banks won't want to lend to you, seeing you as a bad risk, and borrowing from a loan shark can be taking a bad risk! Still, that doesn't mean it isn't possible to get a loan even with bad credit, but keep the following tips in mind.
First off, there are a number of places offering to help you get a loan regardless of your credit score. It goes without saying that you shouldn't trust them, particularly if they charge a fee to apply. You are the customer - the lender expects to make money off of you. You might have to pay a loan origination fee when you get the money, but you should never pay a fee simply to apply for a loan.
There's a name for the type of loan most available to people with bad credit: payday loans. They give you some money now, and you write them a check for that amount plus a fee (which can work out to an annual interest rate well over 1000%) that you postdate to after your next paycheck. Of course, many of these places are now online, and instead hold an e-check, which works the same way.
Beware: the lenders will do whatever they can do to make sure they get their money back! You generally need to have an active checking account that your paycheck is deposited into, so that they know they can take the money as soon as you get it. If for some reason the money isn't in your account on the due date, they'll come knocking on your door..
Of course, if you're not able to come up with the funds to pay off your payday loan, the lender will generally be happy to offer you another loan to pay it off, with yet another set of fees; rolling over loans like this is how many people end up paying several times the original loan amount.
A similar, if less risky, option is pawn shops; while you risk losing your item (and probably won't get anywhere close to its true value), if you're not able to repay the loan at least you lose only the item and don't end up going further into debt. If you have bad credit and don't want to risk going to a loan shark, this can be the best option. Of course, if you don't think you'll be able to repay the loan, you're probably better off just selling your items outright, as you'll probably get a better price.
Having bad credit doesn't mean you can't get a loan when you need money, but it does mean you'll pay more for the privilege. High risk personal loans obviously should be avoided, if possible - they make the interest rates credit card companies charge look generous - but sometimes they're the only option available. Just remember that they should always be a last resort, as payday lenders would like nothing more than to keep you coming back week after week, paying fee after fee on that same loan..