PAYDAY LOANS

• These loans are designed for individuals with poor credit who desire funds quickly. Processing for a payday loan is generally completed within one hour of application and cash is often dispersed upon approval or within 24 hours.
• To qualify for this type of loan, borrowers must be 18 years of age, provide proof of steady income, and have a banking account.
• Repayment is secured through personal check or automatic withdrawal from the borrower’s bank account.
• Most payday loan terms run two weeks and carry extremely high, unfavorable interest rates that can range into the hundreds.

CONSOLIDATION LOANS

• Debt consolidation loans allow borrowers to combine accumulated debt into one convenient, low interest loan.
• These loans are generally unsecured and obtaining one requires proof of good income, verification of debts to be paid, and a signed promissory contract for repayment.
• While consolidation loans are more traditional than payday loans, they still offer higher interest rates for poor credit clients and extend debt payoff length.

CREDIT CARDS

• Some lenders offer secured credit lines for individuals who have suffered financial setbacks.
• These cards often require applicants to pre-load a deposit onto the card. After which, funds can be withdrawn at will.
• Money loaded onto the card earns interest as well as helping to rebuild credit scores.
• To qualify for a bad credit credit card, borrowers will often need to provide proof of good income and show residency history.

When looking for a bad credit personal loan, it is important to research your options and lenders. While many reputable companies are willing to accommodate personal loan needs, there are a large number of businesses who engage in predatory lending practices.

Misleading or altering loan information is a big concern for bad credit borrowers. When faced with a financial crisis, many individuals will often take whatever monies are made available to them.

Don’t be a victim. To be sure that a lender is not using unethical or illegal procedures; keep an eye out for these warning signs:

• Unprincipled companies will ask that you falsify or embellish loan information such as income amounts or debts incurred. This is illegal and your communications with the lender should cease immediately.
• Look at the interest rate. Most cash advance or payday loan specialists elicit exorbitant amounts of interest upon finalization of loan contract. It is not uncommon to see a 400 to 500 percent rate from predatory lenders. These practices are unethical, and are quickly becoming illegal in many states.
• Many unscrupulous lenders may have you to sign forms that are incomplete. Numbers may be missing or altered upon finalization. Hidden fees and unwarranted insurances can also be added without your knowledge, so be sure to read your agreement fully before signing anything.

Obviously, it is better to resolve any negative credit issues before attempting to acquire more or different debt. In reality, this is not always feasible. If a bad credit personal loan is necessary; be very cautious, avoid impulse, and repay the loan as its terms dictate.

Debt consolidation loans offer a ray of hope for those who find debt management to be an increasing difficulty. Consolidation loans work on a simple premise; combine a debtor’s high interest personal debt into one low rate loan.

Notable benefits of a debt consolidation loan include:

• One monthly payment rather than several creates a huge reduction in fees and interest charges commonly associated with falling behind on numerous bills.
• Consolidating debt allows for more financial freedom. Having one lower payment a month may help debtors afford to put more money towards paying off the mortgage or start a savings plan.
• Debt consolidation may improve lagging credit scores by lowering the number of accounts a debtor holds and by showing the rolled over debt as having been paid as required.

For many individuals, a debt consolidation loan is an efficient weapon in the battle of the bills. For others, however; consolidation of debt may prove detrimental in more ways than one.

• For poor financial planners, debt consolidation may give the misconception of freeing up money and credit for the purpose of obtaining more debt. An example of this would be as follows:
  • Sarah has four credit cards, a car loan, and many regular bills such as a house payment, electricity, trash, etc.
  • Sarah finds that with all the money she pays out, there is little left over to enjoy life.
  • To remedy this, Sarah consolidates all her debt into one low payment loan.
  • This frees up a substantial amount of money for Sarah and looks great on her credit score.
  • Now with a seemingly fresh start and a renewed vigor, Sarah rushes head long to the mall to buy that diamond tennis bracelet she’s been dying to have.
  • The problem; the bracelet goes on her newly re-filled credit card and gives her another monthly payment.

Those with poor spending habits rarely learn to manage debt more accurately through debt consolidation.

• Debt consolidation may reduce stress by lowering payments, but has the added inconvenience of extending the debt to longer terms. In theory, this would be ideally rectified with the debtor paying any excess income towards the goal, thus eliminating the debt quickly. Unfortunately, most people do not do this and instead acquire more debt thinking they have enough money to afford them now.

When discussing debt consolidation loans, it is important to note that there are two types. Secured and unsecured.

Secured loans are obtained through the process of using collateral. This means that items such as owned vehicles, homes, or other assets will be attached to the loan and upon failure to repay, the items become the property of the lender. If the debt consolidation loan is paid as agreed, all collateral is then released by the lender.

Unsecured debt consolidation loans are more difficult to acquire. These are often given to consumers who have a high credit analysis and good employment. An unsecured loan is more desirable in the event that financial hardships may increase as it reduces the amount of damage that may be suffered by the borrower if obligations are not met.

When seeking a debt consolidation loan, always do your research. There are many reputable companies who offer these services, but many others impose unfair interest rates and use improper lending practices. Before deciding on debt consolidation, be sure to consider all other methods of debt reduction.

What are they and what do they do?

Unsecured personal loans give consumers the freedom to borrow money without the use of collateral. More traditional loans often come with the stipulation of assigning ownership of certain assets to the lender until loan terms are completely fulfilled. With unsecured loans, lenders retain all possession of valuable property.

Although unsecured personal loans may be used for many situations, they are most often suggested to individuals desiring debt consolidation. The intent of the loan is for the borrower to pay off all other debts with the monies granted to them by one lender. These types of loans are favorable to many lenders as they profit through interest and lengthened term times.

How to Get an Unsecured Personal Loan

Acquiring an unsecured personal loan is sometimes difficult. To qualify, most applicants must have an excellent credit history and a steady income to repay the debt. In most cases, a credit score of 700 or above constitutes a better chance of qualifying for an unsecured loan, but does not guarantee acceptance. It is possible to get one of these loans with a lower score, but interest rates are often much higher.

The process of for an unsecured personal loan is fairly simple and it similar to many other loan requests. Individuals may apply online to several reputable banks or in person at local branches. Most banks require you to:

• Fill out an online or paper application.
• Provide verification of at least one full month of income such as pay stubs, a letter from your employer, or most recent tax return.
• Provide a copy of your most recent bank statements.
• Present proper identification

Then what?

Once the bank receives your request, a loan officer will inspect documentation, analyze your credit score, and evaluate the risk associated with giving you an unsecured loan.

If for any reason the bank feels you may not repay the debt or finds your debt to income ratio is insufficient, a prompt denial is usually issued. In this case, there are alternate lenders that may assume your debt. These lenders often specialize in high risk, low income lending but put borrowers at risk with higher interest rates and predatory lending practices.

If your application is approved, a list of obligations will need to be presented to the bank for pay-off. The bank will then disburse the agreed upon funds to each creditor in order to satisfy the debt. Upon finalization, paid lenders should note your accounts as paid-in-full and notify credit bureaus of your discharge.

After approval and a set amount of time; usually 30 days after the loan is made, you will then be expected to assume repayment of the newly established unsecured loan. If you default on the loan by not making regularly scheduled payments, the lender is forced to initiate procedures to enforce your obligations. Common debt recovery practices include, but are not limited to:

• Wage garnishment
• Mortgage liens
• Negative reports to credit bureaus

As you can see, it is crucial when taking on the responsibility of an unsecured personal loan that you are fully prepared and able to repay the loan as agreed. Consequences for failure to pay back can be devastating for any future plans.