If you’re seeking cash loans with poor credit, there’s a lot you need to think about. The market is filled with plenty of lending options for people who don’t have a good credit score, but you must be cautious. Cash loans, also called payday loans, are a trap that you need to avoid.
Nearly every payday lender on the market wants to saddle you with a bad deal that only benefits them. You’ve probably tried getting a loan through a normal lender, only to be deemed too risky to work with. That makes you desperate and these shady lenders know that. They’ll use your desperation to their advantage.
Before you start shopping for a lender that will work with your poor credit, there are four critical things you need to be aware of when it comes to cash loans.
1. Your Rates Will Be Much Higher
The first thing you need to understand is that you will most likely pay an unreasonably higher interest rate on your loan. Credit scores serve as a reference of risk. The lower your score, the riskier you are to a lender. Even those willing to work with you will want to ensure they are paid for taking a chance on you.
This insurance usually comes in the form of a higher interest rate and a higher APR. Essentially, you’re paying more to the lender for being willing to make a risky investment. The U.S. News & World Report determined that the average APR for a good credit score was 4.29%. By contrast, a bad credit personal loan usually carried a 25% APR. Cash loans can go as high as 400%
400% is far too much to pay for a loan. Anytime you’re paying a bigger fee than what the loan is worth, you’re being taken advantage of.
2. Lenders Will Try to Conceal Their Intentions
In the intro, I talked about shady lenders. The shadiest variety that I can think of is payday loan lenders. Payday loans are incredibly dangerous because you’ll find that they’re so easy to qualify for. But I promise you – it’s a trap.
These lenders’ only goal is to trap you in a recurring cycle of debt that you can’t get out of. They lure you in with promises of no credit or background checks and getting your money quickly. They will in fact usually deliver on those promises; it’s everything that comes after that will wreck you.
How the Payday Loan Trap Works
The key to success in a cash loan scheme is to set such impossible repayment terms on your loan that you can’t possibly repay it. You’ll miss your payment, and the lender will offer to extend your repayment date. They’ll also charge a fee and add more interest while giving you just four more weeks. You’ll wind up being obligated to pay the interest and fees alone, and never actually pay towards your loan.
How to Spot a Payday Lender
When you do a Google search with terms like “poor credit get loan,” I guarantee that some of your results will include payday lenders. They try to blend in with bad credit lenders who offer quality, competitive loans and will advertise themselves in similar ways. This can make it difficult to sort a bad loan from a good one. Fortunately, there are a few key signs you can use to distinguish between the two. Payday lenders typically:
- Will only extend up to $500 (bad credit lenders go as high as $50,000)
- Expect their money back within four weeks (bad credit lenders give up to five years)
- Carry up to a 400% APR (bad credit lenders go up to 36% at the most)
- They usually ask for a cash advance or some other form of down payment
- They won’t do any kind of credit check at all (even bad credit lenders still care about your credit, if only to help you improve it)
3. A Bad Credit Loan is a Better Alternative
While the terms for bad credit loans are not as good as normal loans, they are still much better than payday loans. Not only are the interest rates substantially lower, but you’ll have more time to pay them off as well. As I pointed out in the last section, bad credit loans usually allow up to five years to repay your debt. At the least, you’ll usually have one year.
This means that you’ll be able to access far more money, for far less risk, thank you would with a payday loan.
4. You’ll Have to Shop to Get the Best Deal
No matter what sort of loan you need, the only way to ensure you’re getting the best deal is to compare the terms between lenders. Your own circumstances will dictate what is most important to you. The most important terms you need to pay attention to include:
- Interest rates
- APR
- How much cash the lender will give you
- How long it will take to get your money
- How long you’ll have to repay
- If the lender requires collateral
This search process can take a long time. The team at Trulia tried it with a mortgage and found that it took them 14 days before they found the best deal. Bear in mind – these are financial experts who have years of experience and it still took them that long. If you don’t have much experience or aren’t sure what’s most important, it could take you far longer.
Is There a Way to Make Comparing Lenders Easier?
The team at Loans Now specializes in helping you find the best loans with poor credit you can get. We don’t lend ourselves – we take some basic information and then give you multiple offers to match your needs. It’s free and you’re not obligated to use any of the options we provide.
Most importantly – we don’t offer payday loans. We consider these to be predatory practices that do far more harm than good. We’re here to offer high-quality personal loans and nothing else. Take advantage of this resource to save the time and headache of doing all the shopping yourself.