The loan industry has seen a bonanza of new lenders offering cash advances on salaries to tide customers over until pay day. Pay day lenders have developed in response to rising prices and low wages, tiding their customers through until payday. In theory, the ability to borrow money to get through the rest of the month is a good thing. The problem is, while they will almost always lend to those with a bad credit history – borrowing from this type of lender comes at a cost. Some payday lenders charge APR rates of over 4000%, a sum which would have most people running for the exit.
However, those with a poor credit history can find it very hard to get credit anywhere else, and so pay day lenders are often able to justify their costs with the risks they are taking on lending. This is not a happy situation for anyone with bad credit. So we have created a few pointers to help you find a short term loan that offers a better deal.
Bad Credit Loans
Many payday lenders argue that because their high APR rates are calculated on yearly basis, that it doesn’t represent their true (cheaper) cost . This is true, but ideally, taking out a short term loan shouldn’t be prohibitively expensive. Explaining compound interest rates can be seriously complicated, but very simply, payday lenders often allow you to extend your loan – and then charge you interest on the interest! This is how a small debt can very quickly become a huge debt. So it’s really important to find a short term lender who is offering an ethical and clear service, without piling on unfair costs and charges.
Best Short Term Loans
The best short term lenders, then, are open and transparent about what they charge, how they work and who they are. So what should you look out for to find the best short term bad credit loan?
No hidden fees or charges
Payday lenders will often charge for late payment letters, fees for defaulting on payments, and for rolling-over the debt. A good short term lender won’t include these hidden charges. Try and find a lender who is transparent about fees, and offers an early re-payment option to help you save money on interest.
A Low APR
Finding a loan with a reasonable APR rate might be a challenge, but it’s not impossible. Use a loan comparison site to find a better deal.
Payday lenders are often accused of encouraging customers to take out another, even larger loan after repaying the first. Taking out a loan is a personal choice, and so any company that pushes you to borrow should be avoided.
Some payday lenders do not even have a phone number. So if things go wrong or you’re having trouble paying it is impossible to even negotiate. Always make sure there is a contact name or phone number for complaints.