Posts tagged: unsecured loan with bad credit

Unsecured Loans for Bad Credit

I’ve been hanging around the world of finance and loans now for a while – everything from mortgages to car loans to credit cards. Then in the last ten years or so I see this explosion of personal loans with all their names and variations – unsecured loans for bad credit, payday loans, etc etc. Because of the jobs I’ve had I’m definitely not opposed to the different financing tools; I’m not some anti-debt zealot kook if you know what I mean (not to say that I think people should be in debt – I just recognize that the instruments of finance are fairly important to our economy).

But I just can’t seem to stomach these bad credit unsecured loans – or payday loans, or whatever they’re called. I can’t imagine a single circumstance where it’s a good idea for a person to borrow money this way, although I know what the owners of these corner payday loan stores would say:

1. Payday loans save people who are in truly tight spots, whether they’re facing unexpected car repairs, a medical emergency, a travel emergency (ie a family member out of state being injured, etc), home repairs and whatnot.

2. These guaranteed loans no credit check are not meant to be long term financing tools, and they’re not meant to be used by the same people over an over.

3. Unsecured bad credit loans simply fill a hole in the market, allowing consumers to borrow money much the same way banks borrow from each other when they run short of cash.

Each of these rationalizations should be demolished individually:

1. First of all, every one of those circumstances should be taken care of by having even a modest emergency fund on hand. If a person can operate their personal finances so close to the edge of being broke all the time – that’s still proof they manage their finances! In other words – if you can be just this side of broke all the time, you can change your habits slightly to keep an extra $500 in a savings account to take care of the emergencies mentioned above.

2. Everyone who has spent even ten minutes in the marketing world knows that your biggest source of business is almost always your repeat customers. Consumers are very habitual by nature. The single act of using one of these unsecured loans with bad credit guarantees that a certain percentage of people will use them again. You will not find a single payday loan provider who doesn’t make some effort to keep in touch with his customers so he can lend to them again in the future.

3. This is just ridiculous. Huge financial institutions do many things that individuals shouldn’t be doing. I’ll refer back to #1 and say that all you need to do in life to reduce your financial stress by an order of magnitude is scrape together and maintain a small emergency fund.

And the end of the day, it’s almost criminal that we allow people to borrow money at rates that would end up being 300% to 500% if we let people carry them out for longer terms. I’d strongly encourage all of you reading this to be a much more careful steward over your money – however little you have – so you can sleep better at night and enjoy more peace of mind.