A short term bad credit loan should be one of the last options that anyone considers when it comes to borrowing money. As a nation, many Americans are living paycheck to paycheck. The savings rate for the nation as a whole is negative. This is a sad commentary on a country that enjoys envious prosperity and an overabundance of material goods. Not saving for a rainy day opens the door to financial havoc. How will unexpected medical bills get paid? What happens when the transmission breaks in the car? What does a family do when the main breadwinner becomes injured in some type of accident and can no longer work? Without any savings to help a family through times like this, they have little choice but to borrow money. Hopefully, they won’t have to apply for a nasty short term bad credit loan.There are two basic kinds of loans. A non-secured loan, which is often called a signature loan, requires no collateral. This means that it is not connected to a particular item, such as a car or a house. A person’s credit score, which is based on his credit history, is considered in setting such terms as the amount borrowed, the interest rate, and the length of the loan. Credit cards are common (and popular) signature loans, though they put a maximum limit on the amount of money that can be charged. When a person defaults on a non-secured product, whether it is a credit card debt or some type of short term bad credit loan, the account is usually turned over to a collection agency and may end up in the court system. A secured loan requires collateral. This is the type of financing used to purchase large or expensive items, such as jewelry, furniture, vehicles, and houses. If the borrower stops making payments, the purchased items may be repossessed. A house is foreclosed on if too many mortgage payments are missed.While many people pull out the plastic to pay for emergency medical bills and car repairs, others don’t have that option. Perhaps they are too young to have established a financial record with the major credit reporting bureaus. Or maybe they have made frequent moves and changed employers often. Though their reasons may have been entirely legitimate, the bureaus only see a lack of stability. Through no fault of their own, these people are forced to apply for a short term bad credit loan when an emergency knocks on their door. Unfortunately, these kinds of loans can create a horrendous cycle of debt that becomes almost impossible to escape. It is not much of an exaggeration to say that about the only worse option would be to borrow money from a loan shark or the mob. Though the industry is regulated by both state and federal governments, certain lenders will do everything possible to increase the cash flow into their own pockets at the expense of the financially needy. Before entering into a financial arrangement with any of these lenders, potential borrowers should explore all other possible options. The person who truly has no other choice but to apply for a short term bad credit loan needs to educate himself as much as possible. He will want to make the best possible decisions during what must already be a difficult situation. Only the most dire circumstances could ever justify borrowing from one of these lenders. Doing so otherwise is engaging in foolish and risky behavior.
Payday loans are one type of short term bad credit loan and are a horrible option when it comes to borrowing money. Payday businesses work something like this: If an applicant is approved, the borrowed funds are deposited into the borrower’s bank account. Unless a payment is made beforehand, the owed amount is withdrawn from the borrower’s bank account. The interest on this type of financing option is high. For example, one company charges 25% for one month. This means that someone who borrows $100 now owes $125. The high interest rate continues to accrue until the loan is paid. The businesses that provide this type of short term bad credit loan argue that they provide a valuable service to poor people who have no other financial options during emergencies. But after hearing horror stories from people caught up in the cycle of getting payday loans to pay other payday loans, several state legislatures have taken a closer look at the industry practices.
The payday loan interest rates are still incredibly high, but hopefully new state laws will truly protect the poor from payday predators. The Old Testament clearly condemns usury: “And if thy brother be waxen poor, and fallen in decay with thee; then thou shalt relieve him: yea, though he be a stranger, or a sojourner; that he may live with thee. Take thou no usury of him, or increase: but fear thy God; that thy brother may live with thee. Thou shalt not give him thy money upon usury, nor lend him thy victuals for increase” (Leviticus 25:35-37). People can avoid taking out a short term bad credit loan by establishing an emergency fund. Even a small amount of money set aside each payday will grow, over time, into a substantial rainy day nest egg. No, it may not be easy. But sacrificing a pizza and a video or cutting back on that trendy coffee may mean the difference between surviving a rainy day and becoming payday prey.