CreditSources.org Announces the Top 5 Pros and Cons to Getting a Bad Credit Loan in 2013

Date Published: 
February 15, 2013
Publish Location: 
San Diego

SBWIRE-- 02/15/2013-- Industry Factoid:  According to FICO (the credit scoring developer), more than 25% of people in the USA now have poor and bad credit.

Bad Credit Loans – Developed by lenders to meet loan demand from people with no credit to bad credit.  A bad credit loan is also known as a payday loan and is a relatively small (between $100 - $1,000), short term, unsecured cash advance designed to be repaid by a person’s next payday.  These loans typically carry higher fees and interest rates, are regulated and are not available in all states.

Below are the Top 5 PROS and Top 5 CONS of getting a Bad Credit Loan in 2013:

Top 5 Pros

1 – Access to Fast Cash – Qualified applicants can apply online on a site like CreditSources.org and be approved and get cash fast – it’s not guaranteed, but often on the same day or within 24 hours.

2 – The Online Application is Relatively Easy – People with bad credit can apply online from the privacy of their own home or computer without a lot of extra steps like faxing. Application forms are typically straightforward and easy to understand.

3 – No Credit, Poor Credit, Fair Credit, Bad Credit… All OK – Bad credit loans are designed for what the industry calls the “subprime market” - or in other words, for people with less than good credit.

4 – Loans Are Unsecured – A more complete description is that these loans are unsecured loans for people with bad credit meaning a) the borrower does not have to put up or pledge collateral and b) the loan is made available to people with bad credit.

5 – Data is Secure – Online applications are typically secured by companies like Norton or GoDaddy.  These companies use encryption to secure the flow of data.  To be sure, just look at the page URL – the address should start with https:// versus http:// as the “s” indicates a secure connection.

Top 5 Cons

1 – Fees & Higher Interest Rates – Bad credit loans can be an expensive way to borrow money and should be done responsibly and only when essential.  Loans include fees and higher interest rates with an APR that can range from 200% to 2281%.  Borrowers should do the math and understand the terms being offered.

2 - Terms – These loans are designed to be paid back in short order and can carry additional fees and terms for nonpayment, late payment and loan renewal.  Sites like CreditSources.org, regulatory agencies, and consumer advocates like the Center for Responsible Lending, encourage people to understand these terms up front and avoid the costly mistake of repetitive and expensive borrowing.

3 – Repetitive and Repeat Borrowing – CreditSources.org has coined this behavior as the “Hamster Wheel Effect” - when a borrower starts down a path with one intent only to end up on a path of repetitive, successive, and repeat borrowing with little hope of ending the cycle.

4 - Saving Money – Saving money should always be a priority.  Borrowing at high rates does not promote saving.  Borrowers should only borrow in the case of a short term financial need or emergency and not as part of a long term financial solution.

5 - Payroll and Employment Records Needed – Borrowers have to show employment and payroll records to qualify.  This is only a con if a borrower is unemployed.

There are pros and cons to everything including borrowing money.  Consumers should borrow responsibly, understand the terms of any loan and have a clear path to repayment.  The NCSL web site is a valuable resource for loan statues by state.

Last updated on Jun 23rd 5:21 pm