If you do not own enough cash to pay all the living costs and debts, don’t raise the money you require by taking one of the following kinds of loans. Even if they can give you some temporal financial relief, eventually, they will make things harder – maybe worse. When it comes to reconstructing your finances, simple solutions and shortcuts just do not available.
1. Advance fee loan: Just like the name entails, to get this sort of loan, you need to pay money up front to the lender – occasionally as much as a few hundred dollars. Numerous advance fee lenders will grab your cash and run away, but others will hand you a really insane interest rate. Conventional lenders don’t use advance fee loans.
2. Finance company loan: Any finance companies may make comparatively high-interest loans. A few finance company loans are somewhat unsafe: The lender may be less than sincere about all the fees related with its loan, or they may misguide you into believing that you are acquiring an unsecured loan when the loan is actually secured by your household items, such as your cars, furniture and so forth. (This detail is generally concealed in the small print) If you default on the debt, you may lose the assets. A few finance companies urge consumers to take larger debt than the consumers can afford so they will wind up in default.
3. Payday loan: it is a really high interest short-term loan brought in by check-cashing companies, businesses and finance companies that do nothing except make payday loans. To take this loan, you fill a personal check for the lender for the sum of money you need to borrow in addition to the lender’s fee – generally a portion of the debt amount or a certain amount for every fifty or a hundred dollars you borrow – and you promise to pay back the debt on your upcoming payday. The lender gives you the amount written in the check subtracted by fee but doesn’t cash the check. On the next payday when you pay back the debt, you take the check back. However if you cannot repay the debt on the next payday, the lender shifts the loan until the next payday and you have to pay the lender additional fee, which will likely be higher than the previous fee. Eventually, if you keep shifting the debt and paying off bigger fees, the loan cost go up and you get a more difficult time paying it. A few states have laws on payday loan. Call a consumer law lawyer or the office of state attorney general to check if your state has this type of law.
4. Pawnshop loan: it is a short-run loan (shorter than 3 months, in many states) with a really high interest rate. You offer the pawnshop things that you have, like a DVD player, TV, jewelry, or PC. The pawnshop loans you a portion of the item’s worth. At the final stage of the loan period, if you can’t afford to pay up the loan and the interest, the pawnshop takes your item and sells it.
5. Tax refund loan: a.k.a. instant refund loan or tax anticipation loan, this sort of loan borrowing against your subsequent IRS tax refund. A few tax preparers, as well as retailers, finance companies, check-cashing companies and car lenders, make this sort of loan. Generally the loan will be for no higher than $5,000, and it must be repaid within 10 days. In addition to being forced to pay a really insane rate of interest, you need to give the lender additional upfront fee, and you have to file your tax return by electronic means to the tune of about forty dollars. So when you count in the debt’s interest rate and the related fees, the actual interest rate you pay can be in the triple digits. When the IRS gives your tax refund, it sends the fund immediately into an account created by the lender.
6. Car title loan: If you have the car free and clear, a few lenders will give you a loan for a minuscule fraction of what your vehicle is worth. Typically the loan will be for 30 days and will have a really insane rate of interest. To take the loan, you have to give the lender the title to the car and car keys. The major risk with this sort of loan is that if you cannot pay a loan payment, you risk losing your vehicle.