Are you forced to deal with your bad credit? One of the annoying consequences of having bad credit is that you cannot get loans from banks and other lenders. When they run a credit check on you and they see that you have a poor credit score, they are not going to give you the loan that you are seeking. A consumer with poor credit score is going to be considered to be a high risk borrower. When you encounter a situation where you need money real quick and payday is still a few days away, what do you do?
There are several ways that you can get money quickly. The easiest would be to borrow personally from someone you know. That would also be the quickest way to get the cash you need since they can hand you over the money right away. The problem with that is that you cannot always count on your friends and relatives to have the money to spare. They might not be able to lend you anything. There are other options available. You can always get a loan to meet the financial need that you are facing.
The problem with most loans is that you would need good credit in order to get them. Banks and other traditional lenders would not approve your loan application if they see that you have a poor credit score. So what can you do then if your credit leaves a lot to be desired? The good news is that there are online loans that you can get even though you have bad credit.
Bad Credit Loans Online
These online loans are also known as payday loans. They are for small amounts and have very short terms. The amounts that can be borrowed under this kind of loan are usually limited to a few hundred dollars and it is originally meant to be a means of allowing a borrower to make it through until the next paycheck. These loans are meant to be paid back when the borrower receives his/her next paycheck. If the borrower is unable to pay back the loan on time then the term can be extended after paying the interest for the initial period.
Online payday lenders do not require credit checks on those who apply for loans with them. This is a crucial quality that differentiates this kind of borrowing from other types of loans.
The Downside of Bad Credit Loans Online
But there are many warnings being given out against the use of
quick online loans . Consumers are being told to be cautious about using this kind of loan since it can lead to more serious problems for cash-strapped borrowers.
The main issue that is being cited against the use of quick online loans is its cost. The interest rates charged by payday lenders vary from one state to another, but it is not uncommon to be charged with an annual percentage rate as high as 300%. There are even cases when the APR can be more than that. The borrowers fail to note how expensive the loan is because of the short term, but when one keeps on extending the loan term then the amount to be paid for the interest can become more than the actual amount that was borrowed.
The high cost alone should discourage consumers from using bad credit loans as a first option, but there are other reasons as well that one should keep in mind. An even more important consideration is the fact that it can lead to more financial problems in the long run. If your income is small and you tend to live from paycheck to paycheck then taking on the added burden of an expensive loan might be something that you cannot afford.
Because these online loans are so easy to get, consumers who might not be in a position to afford it could end up borrowing again. When the time comes to pay back the loan, they wouldn’t be able to afford it and so they could end up extending the loan period. They end up extending the loan which in turn causes more financial problems for the borrower. With the high interest rate of online loans the amount can quickly double. The borrower could end up being in a debt trap.
Online Loan Scams
According to experts there is an even bigger problem concerning quick online loans. This has something to do with scams that have been going around concerning online payday loans. These scams have something to do with the bank account of the borrowers. Once the lenders receive information concerning the borrower’s bank account they can get access to that. Unfortunately, some lenders take advantage of the situation and they use the information to make unauthorized payments from the account. The lender can keep on taking out payments from his/her bank account.
The Benefits of Online Loans
Don’t think that bad credit loans are all bad. However, it does offer some benefits to consumers. Though it is quite expensive, there are some situations where using an online bad credit loan would work. When you have no other source of cash available and you need to pay for something that cannot be deferred then a quick online loan is a good option. When the need for cash is so sudden that you cannot work on finding another source, an online loan is a convenient solution.
The important thing is that you should make sure that you can pay the amount when you have to. You cannot afford to miss on the payments because that is the main thing that causes the problem.
Help for Those Who Need it
Online loans also provide help for those who need it in the form of financial boost. People who have poor credit standing for example cannot get other forms of loan, but they can always turn to a payday lender to get the cash they need. This helps a lot in cases of financial emergencies where the consumer really needs to get the money to make it through financially. As long as the loan is paid on time then it can be beneficial.
Alternatives to Online Loans
Though quick bad credit loans can be beneficial in certain cases it would still be better if you were to look for other options first before you turn to them. You can get a loan from a credit union for example. The terms offered by credit unions are far better than what you can get from payday lenders. Loans from banks and other traditional lenders would be a lot better for a borrower in the long run. Even a credit card cash advance is going to be cheaper. A borrower should only decide to use a quick online loan when all of these options have been exhausted.
Are you looking for a source of quick cash right now? Don’t just take out a bad credit loan. You might be trapped with a high interest loan that can lead to even more serious money problems than the ones that you are trying to resolve.