Are you someone with bad credit who needs some extra cash to pay for your bills that you’re having difficulty paying? This can seem like a desperate situation, but one pitfall that those with bad credit assign themselves is to saddle themselves with personal loans as a way to solve their short term cash flow issues. This is a big mistake, for many important reasons. Personal loans have many risks associated with them, particularly for someone who has bad credit. Thinking about getting one of these personal loans to solve your problems? Here are some reasons why you shouldn’t go this route.
If you are someone who has bad credit, you are far more disadvantaged when it comes to getting good and fair interest rates and other important term agreements. Lending companies tend to prey on those with bad credit who are desperate or near desperate when it comes to paying their expenses, which can be used against you. They have the ability to hike up interest rates to extremely high levels; they can add hidden clauses or add ons to the loan that can end up costing you more. They even have the ability to add terms to the contract that you cannot fulfill, which is why it’s important for you to read the content of the contract fully before accepting any loan.
One way that lending companies can really harm your financial future is by offering loans that require collateral for approval. In this loan, you are required to offer up any major assets, like your home or your car or another important belonging that you own, in the terms of the personal loan that you make with the company. In the terms of this loan, it spells out that if you are negligent or doesn’t pay off your loan, then the property become owned by the lending company. Think about this rationally. Do you think it’s a good idea to become potentially homeless all because you were a few thousand Rand behind in your bills? The answer is no! Your home or your car is not something that you should gamble with, and at best these loans are a gamble between you and the lending companies.
If you have a bad credit score, then it's highly unlikely that you will get a loan. Get your credit score first and see where you can improve.
Have you ever heard of a payday loan? This is another form of loan that is used for those with bad credit, and can lead to serious issues. A payday loan is very similar to its name. A lending company offers to loan a family or person a certain amount of money – on the contingency that the money is paid by their next pay day. You never know what might change in your finances, and if you’re giving up your next paycheck to these lending companies, plus interest, then you may be in even more trouble. There are severe penalties for not following the agreement and paying your money back on time, with wage garnishing being just one of the things that lending companies can do to get their money back from you.