When Fishing for a Loan, Stay Away from Shark-Infested Waters
Almost everybody reaches a point at some time in his or her life where it is necessary to take out a personal loan. Whether it is for a major purchase, a special occasion, an emergency, debt consolidation or the supplementation of normal income, people seek loans for many reasons. Some folks turn to very short-term loans such as payday loans, but for those who need a little more time to pay off their loan, an instalment loan is often a better choice. Many borrowers find that instalment loans are easier to incorporate into their budget than a loan that has to be repaid all at once. In addition, reputable instalment loan providers will often provide borrowers with tools and advice that will help them manage their budgets and calculate how well their income can cover all of their financial commitments.
The point is that a variety of loan products are available from legitimate – and regulated – lenders even for people with less than stellar credit. Unfortunately there are, and always have been, illegal lenders as well: the infamous loan sharks who target some of the most desperate and vulnerable people, whose business practices belong in a B-grade crime movie, rather than the financial marketplace. The crackdown on the payday lending industry over the past couple of years has driven many desperate borrowers to turn to some of these predators. And the problem may be getting worse.
Women may be particularly vulnerable
Unregulated, illegal loan sharks continue to play by a set of rules that should have gone out with hoop skirts and manual typewriters. The worst of these predators strive to keep their victims off balance and complacent by manipulating them through emotional, physical, and in the case of women, sexual abuse. Personal degradation, forcing customers to engage in criminal activity, and threats of physical violence are not uncommon, and some have even been reported to demand sexual favors from their female customers who are unable to repay their loans.
No matter how desperate your situation, you always have legitimate choices
Personal loans – For the prospective borrower with a good credit history, a personal, unsecured loan will generally be the most desirable. Interest rates are fixed, and are generally lower for well-qualified applicants who have a well-rounded, unblemished credit history. Approval, processing, and cash disbursal can take anywhere from a few hours to a week.
Secured loans – A loan that is secured with tangible property such as your house or an insurance policy can often be obtained even if your credit history is not perfect. If you fail to meet the terms of the loan, the creditor can take legal action to assume possession of the asset(s) offered as security.
Cash advances – If you have a credit card with an available cash balance, you might be able to withdraw funds against that available balance. The interest rate on the advance will likely be significantly higher than more traditional loans. While you will often have a longer period in which to pay off the loan, if you only pay the minimum payment each month, you could end up never paying down the principal, since the minimum payment could be close to the interest charged. Approval and processing is immediate, since the application and terms are established and agreed to in the initial card application.
Payday loans – These are relatively the small loans mentioned above, taken out for a short period and due on your next payday. These loans can be renewed for a limited number of months, but the interest charged is compounded. Between this and the much higher interest rates charged, payday loans can be the most expensive of all legal loans. Processing and disbursal on these loans is quick, typically one or two business days, and in some cases, even shorter.
Other – more narrowly applicable loans – Different loan types are available to those who fall within specific categories, such as students. The approval, processing, and cash disbursal times on these loans can be significantly longer than more conventional loans.
If you find yourself in need of cash, you will need to consider the type of loan that will be available to you, the total cost of the loan, your ability to repay it, and how long it will take before you have the cash you need. In some cases, even if you are approved for a personal or secured loan, you might find it to your benefit to take out a higher-interest loan such as a payday loan in order to access the cash you need more quickly, then repaying the payday loan as soon as your other loan is processed and you receive the funds. In any case, it pays to be fully informed about the types of legitimate loans available, in order to best meet your unique requirements.
Most importantly, if you are ever in doubt about the legitimacy of a given lender, the debt charity Citizens Advice, linked to in the subhead above, has a page devoted to the subject of loan sharks: how to avoid them and what to do if you are victimized.
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