Should You Take Out a Bad Credit Loan?

Can you borrow money if you have bad credit? It is possible but the reality is that acquiring a loan would not be easy if your personal credit isn’t at its best since most lenders offer their best rates to customers with high rating. Nonetheless, if you badly need cash for an emergency, there are some things you need to seriously consider before taking out a bad credit loan. 

Is borrowing money the real solution? Some people need to change their perspective about what constitutes an emergency and what does not. Is it absolutely necessary to take out a loan now? Have you considered alternative steps that wouldn’t require you to be in debt? How urgent and crucial is your need for cash? Can you wait out until you managed to save up enough money to resolve the problem? 

Can you afford repayment? Paying off your debts can prove to be a grueling task. An installment loan may come with very steep interest rates. Failing to submit your payment on a due date may also cost you extra penalty charges. So think about it. How do you plan to shoulder repayment once the loan has been spent? Would you be able to pay back that amount according to your lender’s terms? 

Which loan should you take? First of all, what is your purpose for wanting to get a loan?  Do you need money to buy a car, fund a business, pay medical bills, or for other personal reasons?  Be sure to find a loan that is suitable to your needs.

In addition, do not forget that if your personal credit is less than stellar, you cannot qualify for certain loans.  For instance, fast loans or anything loans are exclusively provided for borrowers with excellent credit.  If your credit isn't great, you need to make sure that approval would not be based on good credit standing.

Are you clear of the terms and conditions? The specific rules and fees will vary depending on the type of loan and the lending company you choose. Pay close attention to every detail of the fine print. You need to fully understand the stipulations of the contract before signing up anything. 

Can you trust your lender? It’s no secret that unscrupulous lenders or loan sharks abound in the market and borrowers need to be extremely careful to avoid them. What do you know about the lending company? Does it have a solid reputation and track record? Taking some time to do research can save you the trouble of dealing with a fraud. 

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Should You Charge it To Your Credit?

For many people, using a credit card is inevitable, especially for consumers who live in the United States, where credit history and credit score are essential factors that can affect most financial aspects of living such as when applying for a credit card, a car loan, or mortgage; renting an apartment; or when applying for a job.

According to the U.S. Census Bureau, there were 159 million credit cardholders in the United States in 2000, 173 million in 2006, and that number is projected to increase to 181 million by 2010.

However, while a credit card offers the cardholder a quick and convenient access to the things and services they need, it’s important to recognize the potential dangers that uncontrolled use or mismanagement of this plastic presents.

For instance, charging the wrong kinds of expenses to a credit card can easily lead to serious debt problems.  Are you tempted to grab that hot vacation package offer online and charge it to your credit?  Some people may be brave enough to do things without a plan because they can finance it with a credit card but if you will ask the opinion of credit experts, they will most likely say that it’s a bad idea.

If you want to go on an escapade, the best thing to do is make plans ahead and save up for it.  Sure enough, booking a flight online or making a hotel reservation online requires a credit card, but you need to make sure that you already have the cash to pay off that balance in full before the due date. 

Travel expenses (airline tickets, hotel accommodation, car rental fees, food, pocket money, shopping allowance) can prove to be very costly.  Blindly charging these expenses to your credit card before and while on a trip is a dreadful habit.  After enjoying your getaway, a huge load of credit card debt awaits you.

Aside from travel expenses, there are other costs that should never be paid with a credit card unless you are certain that you can pay off the full balance on time. (Read 6 Expenses You Should Never Put on a Credit Card at Creditcards.com)  Things can start to become really ugly if you fail to make the full payment.  Interest rate charges can be so high on some credit cards that it can take you a very long time to zero in your balance if you will only pay the minimum due each month.

The Consolidated Credit, a company that offers credit counseling services, reports that in 2011, the average credit card debt per household is $6600.  It is an undeniable fact that credit card debt is a primary cause of financial hardship for many consumers in the US.

While owning a credit card brings certain advantages, a cardholder needs to have a precise and reasonable answer to the question, “Should I charge it to my credit?”  And if there seems to be no clear answer in sight, then that should be an obvious indication that maybe you should not charge it to your credit after all.

Do you own a credit card? What types of purchases or expenses do you pay with plastic?

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Thanks,
Rachel:)

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