Obtaining Loans for People With Bad Credit

If you have bad credit, you may believe that obtaining a loan is difficult. The fact is, there are lenders that specialize in making loans for people with bad credit. While some of these lenders provide a valuable service, other lenders represent wolves in a sheeps clothing who prey on individuals who are desperate for cash and who have few, if no other options. Nonetheless, if you find yourself considering putting yourself at the mercy of a payday lender, you should run not walk in the opposite direction.

Loans With a Co-Signer

If you have a family member or a friend who has good or excellent credit who is willing to serve as a co-signer, you may have luck obtaining a loan even when your credit is bad. The lender will evaluate your credit along with the credit of your co-signer in making the lending decision. Be advised that if you obtain a loan with a co-signer, he or she is equally responsible for repaying the debt. What this means that if for some reason you stop making payments or if you become unable to make payments, your friend or family member is on the hook for the entire remaining amount of your debt. If you take out such a loan, its a good idea to obtain a life insurance policy sufficiently large to repay the debt in full, with your friend or family member named as beneficiary. Once the loan is repaid, you may cancel the policy if you wish.

Loan Consolidation

If you have built equity in your home or flat, you may be able to borrow against that equity by obtaining a loan consolidation. A loan consolidation carries lower interest rates than advances against your credit card or payday loans, and the repayment schedule is also often more favorable than the payment schedule for a payday loan or a credit card advance. However, by taking out a loan consolidation, you could possibly put your house or flat on the line if you default on the loan.

Pawn Shops and Other Secured Loans

Aunt Mildred left you a hideous cameo brooch which you loathe and never wear, but which is worth quite a bit of money. You could take Aunt Mildreds brooch to a pawn shop to obtain a loan based on the value that the pawn shop proprietor assigns to the brooch. However, you will only receive about twenty-five percent of the value of your aunties brooch. In addition, you must repay the pawn shop loan with interest, or risk kissing the brooch goodbye.

If you need more money than you can obtain from a pawn shop, you may be able to approach a bank or alternate lender about obtaining a loan for your car, boat, museum quality artwork or other high ticket value items. However, in most cases, you will have to surrender the item in question in order to obtain the loan, although you may be able to continue driving your car if you surrender the title. When you obtain a secured loan, you must repay the loan in full, with interest before your items are returned. If you default on the loan, the lender will retain your property as compensation. In the case of your car, the lender will send a repossessor to fetch the car.

Payday Loans and Signature Loans

Payday loans lure many unsuspecting and desperate borrowers into a mire of endless debt. Payday lenders bill themselves as a form of easy credit. While it is indeed true that payday loans do not require collateral and are often easy to obtain, there is nothing else “easy” about them. Payday loans carry extremely high interest rates, along with very short repayment periods that are sometimes as short as two weeks.

Many borrowers find themselves unable to repay the full amount of the payday loan when the original repayment date arrives, so they “rollover” the bulk of the loan and make only a token payment to remain in good standing with the lender. After several months of rollovers, you will have paid many times the amount of the original loan, yet you would have made little or no progress toward repaying the principle of the loan. If you take out a large payday loan or lose your job, you may actually be forced to declare insolvency.

Sam Jones, the author, is vary wary of loans for people with bad credit but realises sometimes they can be useful.

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