Personal loan? Rejected! Credit
Card? Rejected! Overdraft protection? Rejected! That is the response garnered
by most folks with bad credit who seek many financial instruments. Most of them
simply reject the rejections and give up on any attempt to work with
traditional financial institutions.
So, they end up using pawnshops or
check cashing places to borrow small amounts of money at high interest rates
that are just shy of being usurious. Sure, this can lead to feelings of
discrimination or being taken advantage of. But, there are ways to secure a
financial boost when a serious need arises even with a highly blemished credit
history.
Forget Banks and Credit Unions
Of course, banks and similar
institutions are still the most frequently used sources for loans. Approaching
a loan officer at a bank or credit union where you keep your money, is the most
logical step that most folks take to land a loan. But these traditional lenders
are operating under a self-imposed credit crunch to minimize their risks and
simply will not finance any consumer with less than sterling credit history.
Credit card companies follow along. If you have been rejected by one traditional
lender, you will be rejected by the others. Credit policies differ little from
bank to bank. So, there is no need to keep trying. Also, each credit
application puts another ding on your credit history.
Forget Payday Lenders and Pawnshops
Having been rejected by traditional
lenders, many folks turn to pawn shops and payday lenders. Though not hard to
get an approval on a loan request, the consequences of using these lending
services can become financially devastating. A pawnshop requires collateral in
the form of valuable property, usually jewelry, electronics, or musical
instruments. Of course, the appraise the property at a small fraction of what
it is really worth and require payments within a very short time. Many
borrowers cannot redeem their property by the due date and show up a day later
only to see their property already on sale.
Payday lenders have no collateral
requirements, but they are really nothing more than legal loan sharks. Even
though they are governed by state laws, the interest rates they charge are
hundreds, yes hundreds, of times higher than what a bank or credit union would
charge. They attempt to excuse their loan shark fees and rates to be caused by
the tremendous risks they take. They are more than recompensed for their risk.
Extensions are usually available, and often renewing the loan on a monthly
basis becomes part of a borrowers budget and they sink deeper and deeper into
debt.
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