The Dangers of Bad Credit Loans
Every single financial service ever created has a dark side. If people would understand that before indulging in acquiring them, there would be much less debt in the world. One such service that individuals are taking for granted is represented by bad credit loans. Financial services share yet another similarity: they all look inoffensive. Bad credit loans all the more so. You’re probably wondering what can happen if these are handed out to people with low credit score. Well, a lot of things can happen, and now we’re talking about the less pleasant effects of the bad credit loan. Let’s take a look at these. Even though it appears that it’s a life-saver, it can get you in some trouble.
Bad Credit Loans Can Be Bad Because:
Say you’ve found a lender who is willing to help you out in spite of your bad credit. You are surprised because you didn’t think you’d get it. Now, the lender vouches you’ll be getting your money once you’ve paid an advance fee. Of course, you’ll pay it. You won’t get your loan without it. But now here comes the bad news: the lenders takes that money in the advance fee and disappears. You’ve just been scammed. There is nothing you can do to get your money back. You won’t be looking at bad credit loans with the same eyes after this has happened. Unfortunately, a lot of people fall prey to this type of “lenders.”
Bad credit loans are often coupled with short terms. These can be as short as two weeks. If you can’t repay the money within that span, you will have the option to extend the loan. If you fail to repay it even then, you can extend it again. Are you starting to see the pattern here? Even though the sum is probably insignificant, you can’t repay it because the term is so short. Because of this, you’ll enter a vicious cycle until you’ll be able to pay the loan back in full. Moreover, each time you extend the loan, you’ll need to pay a certain fee. The interest, which is high, to begin with, will continue to grow.
High Interest Rates
Take this as a counter-measure to your low credit score. You are a risky client, even though a loan is granted to you. This is how the lender makes sure you’ll have enough motivation to repay the money. This is probably the biggest disadvantage of bad credit loans. Some people cannot afford to repay the loans because of this. Sometimes, lenders know they won’t, but they still hand them the loans. Why would they do such a despicable thing? To make money, of course. The longer it takes for you to pay the money back, or the more you start to be late on your payments, the lender will stuff his pockets with the finances you’ll be paying on penalties.
You May Risk Your Car
This is applicable only to what is known as “title loans,” a form of bad credit loan. In this circumstance, you are given a loan that is equal to what your car is worth. Until you pay up, the title of the car is in the hands of the lender. If you fail to pay back the money, the lender has the right to repossess your car. This is outrageous, yes, but this is how things work. In finances, there is not much space for feelings.
They Can Cause A Further Drop In Your Credit
This can be a consequence of the credit check performed by the lender. A soft credit check is okay, but a hard credit check can take a few points out of your score. You can’t afford that, since you’re already with a foot in the grave. How is it possible for a lender to perform such a credit check? Well, although you’ll probably get your bad credit loans, the lender may still want to take a look at your credit history. It’s really nothing out of the ordinary. If he asks you to give him/her the permission for a hard credit check, do not.
There are pitfalls at every step when you’re walking in the financial domain. The saddest thing is that many lenders don’t tell you about these disadvantages beforehand. They wouldn’t make any money if they did. Before you do anything, please visit Bad Credit Loans and speak to a professional. You will be given information on the minimum requirements for this type of loan, as well as on how to make sure you’re getting a good deal. We know there’s a slight chance we’ve scared you with the information outlined in this article, but it’s better to know the truth than end up in a situation that is anything but pleasant.