It is no secret that times are tough
financially for many people. As a result of the tough market both credit cards
and banks are routinely rejecting applicants who a few short years ago they
would have lent money to happily. The result is that many people with bad
credit scores are left to resort to payday lenders, pawnshops and check cashing
agencies that are in business that loans little money with high interest rates
and horrible terms. Therefore, when the time come to get a more legitimate
loan, many people with bad credit are so jaded by the process that they feel
discrimination. However, options are available to these people. There is a way
to get unsecured loans, even with bad credit as long as you know what to do and
where to look.
Know Where You Stand
No matter the bad press that major
financial institutions have gotten as a result of the recent financial
collapse, the most likely place for an individual to get a loan is from a bank
and often the same bank where he has a current account. Yet, this is not always
the best bet anymore since many banks reject anyone with a blemished credit
outright in order to lower their overall risk. The same is true for credit card
companies as well. They are just not willing to take risks on those with a
shaky financial past.
Therefore, if you have been rejected
recently, chances are that you will be rejected again. What you need to do in
order to secure financing from traditional financial institutions is change
your credit and the best way to do this is to pay back a loan in good standing.
However, it is not likely that you will be able to secure that loan from a
traditional lender. Furthermore, continuing to seek loans from these
institutions will further harm your credit due to the number of inquiries.
Do Not Trust Payday Lenders or
Pawnshops
Once someone with bad credit is
rejected by traditional sources, the easiest and most often used next step is
the payday lender or local pawnshop. These people specialize in giving loans to
anyone and therefore getting money is easy. Yet, the results that they give you
are often more harm than good.
Payday lenders do not ask for
collateral, however the practices that they do employ have led many people to
liken them to loan sharks. The interest charged on a payday loan will be
exorbitant due to the higher risk and generally the payback period is non-negotiable
and limited.
Pawnshops are no better, the only
difference is that they ask that you put up some of your possessions as
security against the loan. They will then "hold on" to your things
until you pay them back. The problem is that their assessment of your
possessions' value is often far below their actual worth and many pawnshops are
known to turn around and sell your things if you are even one day late in your
payment.
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