Learn the dangers of predatory bad credit personal loans. Discover ways to spot the right type of loan that can improve your financial situation.
Not all bad credit loans are created equal. While many of these loans serve their real purpose to help people meet their needs despite their limited financial options, many families suffer from high-cost, small dollar personal loans like payday loans. The costly nature of this type of loan has increasingly become a serious concern for companies and individuals who promote ‘asset-building’ instead of feeding loan sharks with hefty interest rates.
As many lower-income households struggle to meet basic needs, many of them opt for small, short-term bad credit personal loans, just to meet expenses. Find out the dangers of bad credit loans below:
Debts grow overtime
Despite the attractive nature of this type of loan which seems to offer small interests, many consumers pay more than double of the amount they borrowed. Especially payday loan consumers. The interests accumulate every time the borrowers fail to pay off the full balance of the loan within the loan period. So, majority of the payday borrowers cannot repay the principal, only the penalties and fees for re-borrowing.
It’s one thing to grow interests, and another thing to see your debts pop out like mushrooms. Payday loans and other types of credits extended to people with bad credit often carry high interests and late payment penalties that compel low-income families to get another loan, in hundreds of dollars to repay an existing debt.
Instead of using that money to fulfill their needs or to save for the future, numerous borrowers also pay the loans to renew a “short-term” loan for as many times as they are allowed to do so. That means, if you owe $100 with 20% interest, and you missed payment for a month, you may have to renew the loan so you can repay your monthly payment and renew it again whenever you miss your repayment schedule. The cycle goes on and on, until you have fully paid the loan.
Undermines the financial security of the borrowers
Many consumers fall for unfair and deceptive payday and bad credit loans. With the rise of online lending agencies that are not recognized by the Australian government, it is very important to deal only with well-established finance companies that offer legitimate and affordable loan products.
There are only three questions you should ask yourself when looking for the right bad credit loan.
- Is it unfair? Look into the terms of the loan agreement and check whether there is a good chance that you’ll end up paying more than thrice the value of your loan.
- Is it deceptive?
- Does the company tolerate abusive practices like harassment, and incessant calls by their credit collectors even in the middle of the night? Remember that a reliable bad credit loan company ensures that their consumers are given enough opportunity to avail their affordable loans without challenging the borrowers’ financial security. A dependable lender innovates and strives to create better, low-cost loan products.
Features of a reliable bad credit loan
If you’re looking for affordable alternative small dollar loans without hefty interests and charges, here are the loan features to consider:
- Consumer-friendly. Is it good for people who are borrowing loan products? A good lender accommodates your borrowing needs while taking into consideration not only your capacity to repay but your personal situation as well. It schedules payment at times that you’re most likely to receive money, and offers a grace period for you to pay off your balance, before declaring you in default.
- Affordable small dollar installment loans. Is it low-cost? Or, would you have to pay double or triple the borrowed amount the moment you missed payment? Make sure that the interest rates and the penalties are reasonable.
- With loan terms designed to help borrowers manage short-term emergencies
- It aims to break the cycle of debt. There are loans designed to exhaust your financial resources, while others actually help you meet your needs while you work on your dreams. Always read the terms of the loan agreement to ensure that the lender will not charge exorbitant interests and fees in exchange of a small amount of loan.
- Offers mix of loan features to help you improve your financial situation
While there can be dangers associated with bad credit loans from some private lenders, ALC Commercial are reliable and consumer-friendly. We offer a wide mix of loan products to help you meet your needs. Break the debt cycle and invest for your current and future needs. Contact us today on 1300 886 996!