Credit can help immensely when you run into a financial hardship. Even when these events happen and you need cash fast, you want to try and avoid certain credit opportunities. There are several types of credit that are marketed towards people with bad credit or no credit. These will end up costing you so much more money in the long run, and it is best if you avoid them if you can. Read on to learn about these types of credit.
Bad credit loans
You have probably seen advertisements for quick loans available even if you have poor credit. If you have poor credit this might be one of your only options, but it is best avoid this kind of loan. The interest rates for bad credit loans are huge, and not worth the money you will have to pay back over time. Below are some examples of bad credit loans.
Auto loans for bad credit – These loans usually come with an interest rate well above 10%, and span over a time of 60 months or longer. Most of the money you will be paying for the vehicle for the first few years is interest only. Of course there are options for refinancing to reduce your monthly payment, but you will end up paying an extreme amount of money for a vehicle that might not be worth it. With the miles and wear you will put on your car over the years, you will end up overpaying for the vehicle because of the high interest rates. Make sure you do your research and options before you take out a high interest auto loan
Payday loans – Payday loans seem like a good idea, in theory, but they too come with high interest rates. Not only that, but you are also using your monthly income to pay for an item or service, and when it comes time to pay off the loan, you have to forfeit most of your paycheck. Be careful and fully plan ahead if a payday loan is your only option.
Title loans – Car title loans are probably one of the absolute worst options when deciding on a loan. Like every other bad credit loan, car title loans will likely have high interest rates. If you end up not being able to pay back the loan on time, then you risk losing your vehicle. If this is your main form of transportation for day to day activities, this is just not something to risk losing. Steer clear of car title loans whenever possible.
A better option is out there
Do not get conned into taking out a loan that is specifically marketed for those with bad or no credit. Companies that offer these types of loans are really taking advantage of the consumer who needs help by putting them into further debt. If you find yourself in need, make sure to look for other options, and only utilize the above bad credit loans if absolutely necessary.