In the 21st century, it is easier than ever for people to borrow money, regardless of their credit history. People with bad credit might not have access to the world’s best loan terms, but they will have access to something. There are willing lenders to serve every level of consumer. However, the best lending terms are not always available to people at the bottom of the social ladder. More than a few opportunistic lenders have been known to prey on the need and ignorance of low income borrowers. Still, not all of these lenders are bad. It’s tough to separate the good from the bad when it comes to lenders like these. We’ll talk about the differences below.
Check out this Badcreditloans.com review to see an example of a quality lender for people with bad credit. Most of the quality lenders at this market tier share many of the characteristics described. For one, their terms are clear. You’ll know exactly how much you have to pay each month and how long you have to pay it, including clear numbers expressing your total payments during the loan term. Borrowers will not face penalties if they pay off their debt early. The interest and fees will not be exorbitant. Loan terms will play out over standard time periods, like years (not weeks or months). Finally, it will be easy to find good, straightforward reviews and comments about good lenders.
There are a slew of lenders and financiers that craft loan terms that put low income and bad credit borrowers into difficult straits. For example, it is a common trick for so-called “Payday lenders” to have interest that compounds weekly or monthly, rather than the standard yearly. In some cases, if a borrower is unable to pay back the loan within the standard period of time, they can find themselves in a debt spiral with interest amassing into more than 100% or even 1000% of the original loan sum.
Another technique that bad lenders frequently use is to encourage a borrower to focus on the monthly payment alone, rather than the total amount paid, the interest, the fees, or any other loan factor. You’ll see this in used car lending all the time. Dealerships that accept “bad credit, NO credit” (and similar claims) often handle financing themselves without bringing outside lenders into the picture. Their strategy is almost always to offer a loan that seems affordable in the month to month, but which amounts to a price that far exceeds the value of the vehicle. If the buyer misses a payment, the car is repossessed and the whole scheme starts all over again.
As you can see, there are a few lending options for people with bad credit, but not all of them are good. It’s important for people with bad credit to understand what is available to them and to also be on the lookout for predatory offers which seek to take advantage of their bad financial situation.
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