It is enticing to seek the assistance of a lender who claims to have specialization in offering personal loans to people with bad credit. Some lenders do not look at you credit history at all. You might feel happy to get the financial assistance that you were looking for. But have you ever thought of the cost involved in having such privileges?
The reality behind much publicized personal loan for Bad Credit
The lenders are doing no favor to you. They give you money only after ensuring that you have a regular and consistent source of income. The excessively high interest rates that usually come with such loans can easily make these loans an instance of predatory lending. Sometimes the interests are such that you end up paying more than double the amount you borrowed if aggregated for the entire loan term. It is better to avoid such loan sharks.
Take a simple example. You borrowed $100 for a five-year term at a 20 percent annual interest rate. At the end of the term, you will at least pay $100 over the amount you originally borrowed. This is possibly the lowest rate that you can get in the market. The actual rate may be even higher and if you include the closing cost and other fees (hidden as well as known), the cost can go up significantly more than you can comfortably control.
There are other issues as well. Some lenders might want to take advantage of the situation you are in. You have an urgent need for cash, say, to pay for taxes, medical bills or car repair. You are desperate to get a fund immediately in order to meet the financial obligation. You see an advertisement that promises a quick personal loan solution without any credit check only on the condition that you pay an upfront fee online. Such misleading advertisements are likely to be nothing more than a scam. They will take your money and never show up their faces again!
Is there any Solution?
Frankly speaking, there are not too many solutions for people with bad credit. You will either have to forget a lending solution or prepare for paying a hefty payment every month for several years. It is not possible for many to go either way.
What to do then? Is there no borrowing option for people with bad credit?
In fact, there is no easy solution, however, you might find the alternatives described in Personal Loan Options for People with Bad Credit somewhat helpful.
The best way is to avoid the need of a personal loan altogether. This requires a drastic change in your lifestyle. You need to have a strict budget plan and refrain from unnecessary expenses as far as possible. You can turn the course of your financial drain by putting a tight cap on expenditure and cash outflow. It is better to pay attention towards improving credit score rather than seeking a bad credit personal loan every time you are in financial trouble.
Did you ever feel the need of a personal loan when you are not keeping up well with your credit score? Share your experiences with bad credit lenders.