Credit High Loan Personal Poor Risk

Posted on August 29, 2008
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It’s no fun to have bad credit. Sometimes it feels as though no matter what you do, things just get worse. Good people have bad credit. It can happen with a job loss, a medical emergency, or a car accident. It can also happen when good people lose control of their finances.

So what can an individual with bad credit do when an emergency arises and they need a quick personal loan? Too often they’ve exhausted other resources such as family and friends and with a personal from somewhere the consequences to their family can be dire.

What they need is a personal or unsecured loan. One option that many people turn to is “payday loans.” Payday loans are often a double-edged sword. These loans are short term, small amount, high-interest loans. Usually, they are limited to amounts under $500. The borrower writes a post-dated check for the next pay date in the amount of the principal and interest. The interest rate is extraordinary ranging from annual percentage rate of 300% to 1500%.

Unfortunately, too often the first payday loan, turns into a series of payday loans, with the borrower digging themselves further and further into debt. Because of the public outcry about the extraordinary profits being made from the people who can least afford it, other institutions have stepped up and are beginning to offer short term personal loans.

Credit unions were the first to step up, offering short-term loans to their members at far lower interest rates and extending them over longer periods of time. The typical short-term personal loan is written for 90 days, which gives the borrower adequate time to repay the loan. Payments are low enough that the borrower’s budget isn’t completely crushed. Other institutions, such as banks and savings and loans, are also starting to step up.

The most important thing for individuals with bad credit to do when an emergency arises and need a personal loan, is to explore all the options and find the best one for the long term.