subject: The Drawbacks To Bad Credit Bank Loans [print this page] There are a lot of times when we find ourselves in need of money, be it to pay bills around the holidays, to fix a car that just broke down, or to pay off medical bills. Whatever the need getting a loan is of the utmost importance, but what happens when you have bad credit and most banks won't give you a loan?
When you have bad credit you are very susceptible to unscrupulous lenders who are looking to take advantage of people in need. When you have lots of options it's easy to shop around and find the deal that works best for you, but when you are in desperate need you are more willing to sign your name even though the terms may not be ideal, and herein lies the problem.
Banks lend money based on a specific risk class, and they do this not to be difficult but to protect their company from loaning too much money that will never be paid back. In order to make up enough return on this risk some banks that will make bad credit loans charge a much higher rate of interest to borrowers with questionable credit.
While this is an understandable part of risk management there are a lot of companies that take advantage of the situation charging 30% or more on high risk loans. While this is illegal in many states, it is still being done and there are a lot of desperate people who need the money badly enough to agree to the loan.
There are also other companies that are complete scams. These companies trick people in to giving money or signing away property in exchange for a loan that will come in the future. The problem is for many of these scams the loan never comes and the borrower is out more money this time. Obviously this type of scam is illegal but even if the authorities crack down on it can be very difficult for many people to get back their money or property.
So what can you do to avoid being taken advantage of? Well first of all make sure you have completely read and fully understand any paperwork you are signing. I can't stress this enough, if you don't understand the conditions of your loan paperwork do not sign it. If you have trouble understanding it then make sure the bank representative explains it to you or bring someone you trust along with you to help.
by: Wayne Sather
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