Jason asked us the following question:
“I’ve been out of job for six months last year at which time I defaulted on some of my credit. Now that I have a stable job, I want to fast track paying all my debts while I can. I’m thinking of getting a bad credit loan to plough it back to paying off my older debts. Is this recommended? I’m aware of the higher interest rates that I’d be paying, but for me, the faster I get rid of my debts the better.”
– Jason, 34
A simple math will help you check if bad credit loans guaranteed approval are for you. If your salary, plus any other income that you may have, can cover your original debts plus the new interest rates from bad credit loans guaranteed approval, then your idea will work. However, even if it can, using all your money to pay your loans is a bad idea.
Lifehacker offers a caveat if debt consolidation will work for you: it’s a financial instrument, which means the lender will earn from the consolidation or else it won’t offer the product. Even if it’s tempting to write off your past debts in exchange of a single loan, paying off this new loan over a longer period may cost you more than paying off for each of the old loan. Debt consolidation is usually long-term because that’s where the lender gets to create a return, through low but recurring interest.
Still, paying off old loans with a new loan makes sense if you’re paying a high interest plus penalty fees in your old loans and you can’t negotiate a deal. In this case, getting rid of the old loans means avoiding further penalties that rack up your monthly payment.
However, keep in mind that you still need to live for today and the future. That means you should still be saving or investing a portion of your income on top of paying back your loans. But the picture is not that simple. Forbes.com talks about this age-old issue of paying debt vs. increasing savings in various scenarios when the former is preferred over the latter or vice-versa. Still, the bottom line is not to use all your money just to pay off loans.
So go back to the drawing board and list your living costs, target savings in the next few months and outstanding balances in one worksheet. Then create another worksheet this time with bad credit loans guaranteed approval added to the picture. You can clearly see if bad credit loans will meet your goal (speed up loan payments) or will it just add more costs to your monthly budget. In case you need one, here’s a good resource on how to create a simple household budget.
When bad credit loans guaranteed approval are recommended
The proliferation of bad credit loans guaranteed approval may tempt you to get one, just like many borrowers have experienced in the UK and Canada. However, it is not for everyone and, often, it can spell disaster rather than solution to the borrower. We can think of three situations when bad credit loans guaranteed approval are ideal:
- For people like Jason, who will use bad credit loans guaranteed approval to shrink down their debt, not increase it.
- For people with steady income but who are short on cash flow, bad credit loans guaranteed approval can bridge the gap between paydays or income streams.
- For people who are not liquid during an emergency but they have money tucked away somewhere, bad credit loans guaranteed approval can provide a cash opportunity while they secure their real money.
Dangers of bad credit loans guaranteed approval
Don’t make the mistake of using bad credit loans guaranteed approval for non-essential items. Not even for essential items if you can delay the need. These loans are easy to get, but they command stiffer interest rates and penalties to make up for the risk. It is easy to fall into a debt trap with bad credit guaranteed approval when you are paying for older debts and a new set of debts is made.
Your loan bills can jack up exponentially, and you’re likely to end up paying for the interest alone of these guaranteed online loans but not the principal; hence, it’s a trap that pins you down in debt forever.
Be honest, too, that you’re getting bad credit loans guaranteed approval because, to begin with, you are short on cash. Make sure to use this loan only when it puts your finances in a better light. For example, the loan can help you buy more supplies for a new client, in turn, giving you more profits. Another case can be the loan helps you to perform work while waiting for the next salary, when you can pay off the borrowed money. Getting this cash may be easy as stated in the latest Alabama news about guaranteed loans pointing out the use of search technologies that allow for faster loan searches. However, paying it off may not as easy as with your older debts.
Here’s a good way to avoid wasting bad credit loans guaranteed approval: do a bank-to-bank transfer when paying the bills instead of withdrawing the cash; you’re likely not to spend the cash for some extra items like that chocolate bar. Yes, it’s a seemingly trivial matter, but debts are often a result of small expenses that stack up until they become unmanageable. One small purchase can lead to more small purchases until your principal payment is used up so you roll over the debt.
Tips to pay off debt
A 2014 analysis reveals that the average household in the U.S. owes more than $15,000 in credit card debt. If you are swimming in debt, do not be hassled. Try to implement these strategies to pay off what you owe, and start saving for the rainy day.
CONCLUSION
Bad credit loans guaranteed approval are meant to make life easier, not harder, for you. The rule of thumb is simple: will it increase your ability to pay up or diminish your finances altogether? Answer that question ten times before you get bad credit loans. And if you’re planning to use bad credit loans guaranteed approval to pay back loans, remember it’s only one of the many ways to do this, as a FinancesOnline.com article pointed out.
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Aren’t these types of loans predatory? They’ll offer to consolidate your debts only to charge you with hidden fees and extra charges, then you end up paying for more than previously. Will it even improve your credit score because I heard borrowers say they’ll do this to get a fresh start?
Anna, keep in mind that not all lenders are predatory. You need to leave the rock you’re living under because a quick search online will show you a lot of credible lenders. To know if the lender isn’t predatory, find out if it allows prepayment without added costs. That means you can eliminate the penalties and high interest in your old debt and if you pay your new loan ahead of term, then you actually save some bucks than paying off the old loan with a high interest. But if you’re still wary of these lenders, SBA suggests a few loan options like federal and state loan guarantee programs, community banks, and credit unions. These lenders still require your creditworthiness, but they can be lenient when they know you have a stable income.
SBA also has its own loan products, but they’re for small businesses, not individuals. Loan maturities are lenient, especially if it falls under these categories: real estate for 25 years; equipment for 10 years; and working capital for 7 years.
Of course, you need a good credit score to get these loans. It works best for small business owners who are turned down by financial institutions despite having a stable revenue channel (maybe because the loan request is too small to make money off it?).
There’s a misconception that these types of loans are for people who need money because they don’t have a stable income. If you don’t have good income, believe me, no one will care to lend you a dollar. Bad credit loans target people who have problems with cash flow, but who can repay in a few weeks or months after getting their financial bearing back. In many ways, these loans work with the same leniency and open-mindedness as the SBA loans or state loan guarantees, but like these loan programs, your creditworthiness will still be put under scrutiny or a security will be required.
Is paying a single debt more feasible than paying numerous past loans? That’s exactly my experience. I used to have 4 credit loans to shuffle, then I consolidated them into one so I only have one figure to target each month. At the least, consolidating your debts makes it convenient to pay off all your liabilities.
I think matt the question is--why get another lender to perform the consolidated figure when you can do it on your own? Because that’s what debt consolidator does for you, make it convenient to pay all loans with a single figure. You can easily figure this out by summing up your total payables then meet that target each month by taking that total amount off your salary. I sense some laziness in your mindset why you seem happy about your debt consolidation benefit.
How could paying off a loan with loan make sense when, in fact, you’re merely transferring the interest from one lender to another? I know a few friends who took this route and I’m not sure if they’re better off with their new loan? My guess is they ended up with the same monthly payment amount so it begs the question--why consolidate the loan in the first place?
TrixieMayer, you’re looking at it from one perspective alone. Didn’t the author mention debt consolidation can work if your old loans have raked runaway interest rates because of penalties for late payment and you can’t negotiate a restructuring? In that case, the only way you can put a stop in the penalties is to pay off the loan at once. By getting another loan, you can do stop the penalties, so you end up with paying just the interest (of the new loan).
Do your homework thoroughly when it comes to bad credit loans. Go online and find compare the terms and interest rates offered by various lenders. This will help you eliminate the chaff and get the best deal possible.
Approved bad loans? Tough to resist when you are 25 years old and building your tent-full of shoes and cool outfits. I see so many of my junior colleagues int eh office constantly taking these money that get dangled in front of them, and who can resist? I have a junior associate who even got an approved bad loan to payback his tax! Thanks for this article, i hope this gets though the minds of your many readers so that they can be financially healthy!
Imagine the huge percentage per annum of a loan as opposed to the very small percentage your money earns in the bank! It's a vicious cycle! I have just managed to pay off my credit cards and me personal loans, and right now, I prefer to live below my means so that i can invest in a decent savings plan.
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