Tuesday, May 13, 2014

Unsecured Loans for Those With Bad Credit - Good Idea or Not?

Considering Unsecured Loans for Those with Bad Credit

An unsecured loan is not the best way to overcome a debt problem. Interest rates for unsecured loans are rather high. Despite this fact, many customers take out unsecured loans almost every day, though they may not be aware of it. Basically, that is what you are doing whenever you use a credit card. Beside credit cards, other unsecured loans for those with bad credit are available.

Not everybody with bad credit will have a credit card, after all. And these people need an infusion of cash from time to time, just as anybody else does. Secured loans are those that have collateral, such as real estate or stocks and bonds, to cover the cost of the loan should the borrower default. These are less risky to the lender than unsecured loans so their interest rates tend to be smaller.

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Merchandise or Cash - Charge It

You can use the credit up to your limit to purchase pretty much anything you like. Just remember that if you carry the debt on your card for too long, you will be paying some pretty hefty interest rates - sometimes up to 18% annual percentage rate (A.P.R.). The best way to use credit cards is to completely pay them off every month. Using a credit card is an convenient way to get an unsecured loan for those with bad credit.

If you use your credit card for a cash advance, the interest and fees meter starts the minute you pluck the cash from the ATM slot. Transaction fees can range up to $30. With cash advances, the credit card issuer can charge the highest rate legally allowable - sometimes up to 24% A.P.R. Never pay only the minimum due every month, because soon you'll just be paying the interest, making no reduction in the main cost at all.

Line of Credit - High Benchmarks

If you anticipate having to purchase some big-ticket items in the near future, such as house repairs or expansions, kid's tuition, or even traveling, you should approach your bank or credit union for a line of credit. To qualify for such an unsecured loan, you must have an excellent credit history, steady employment with a good salary, and often you must already have accounts with the financial institution.

Overdraft Protection - Borrowing to Cover Checks

If you have a good relationship with your bank or credit union, it can be quite easy to take out an unsecured loan when you need it - just write a check. You will have to pay interest on the borrowed amount. But this is often far less than an uncovered overdraft, fees for which can often reach up to $35. Or if a check gets returned for insufficient funds (N.S.F.), you could end up paying a fee to the merchant as well as to your bank or credit union.

Cash Advance Loans - $100 to $1500

Also called Payday Loans, these unsecured loans for those with bad credit can best be found on the internet. Traditional brick and mortar lenders are reluctant to make small, unsecured loans. Private lenders have stepped in to fill the breech. While these loans are relatively easy to acquire, they do carry rather high interest rates. They usually come due within two to four weeks. You can roll them over by paying the appropriate fees, but this starts to get real expensive, real fast.

Better Than Nothing?

That is for you to decide. As you can see, unsecured loans for those with bad credit are not the best deal in town, but often they are better than nothing at all. Just be sure to pay them back under the terms of the loan contract so that you do not add anymore rough spots to your credit history.

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