Individuals with bad credit often panic when an emergency arises. Already barely making it from payday to payday, an emergency such as an auto repair, sick child, or a job layoff, can send them spinning out of control.
So what can an individual with bad credit do when an emergency arises and they need a quick personal loan? Too often they’ve exhausted other resources such as family and friends and with a personal from somewhere the consequences to their family can be dire.
What they need is an unsecured personal loan and they need it fast. The most popular and widely available unsecured personal loan is the payday loan. Payday lenders lend small amounts for a short period of time and don’t require a credit check at all. But there are downsides to the payday loans. For one thing, the amounts are usually limited to under $500, secondly the interest rates are outrageous, ranging from 300% to 1500% as annual percentage rate.
The major drawback with payday loans, however, is their incredibly short term. Borrowers, who are already stretched thin, have difficulty repaying the loan in a two-week period. This leads to rolling over the loan, which in turn leads to more fees. Too often it becomes a vicious cycle. Fortunately, as word of these predatory lending practices has filtered into the media, other institutions have stepped up to offer short-term personal loans.
Credit unions have been one of the first to meet this need. There are many advantages to seeking a short-term personal loan from a credit union. First, the interest rates are much lower, second the term of the loan is usually around 90 days, and finally the credit union usually limits the number of short-term loans you can get in a year. In addition credit unions can provide free credit counseling and perhaps help you find some long-term solutions.
The most important thing for individuals with bad credit to do when an emergency arises and need a personal loan, is to explore all the options and find the best one for the long term.
Tags: Loans