Bad Credit Payday Loan: Solution or Problem?


Think twice before you walk in the door of that loan shop. Although, you can get a bad credit payday loan even if your credit report looks like a bad report card, youre probably just going to dig yourself into deeper trouble. Instead of taking money to the bank youll be borrowing money all the way into bankruptcy.

The Problem

Anyone who is willing to extend you a bad credit payday loan knows that you are desperate for money, and they are going to take advantage of that for profit.

Some states, like Tennessee and Colorado, have called those who give a bad credit payday loan loan sharks and implemented strict regulations within the industry to control interest rates and collection practices.

Although you can keep extending the amount of time you have borrowed the money, a bad credit payday loan comes with strings attached such as every time you renew the loan term, youll be charged a sizeable fee, usually to be paid every two weeks. If a year goes by and you skip paying the loan off, these companies have been known to harass customers with debt collectors and even seek to have deadbeats thrown in jail. Caveat emptor!

The Federal Trade Commission recommends becoming familiar with the Truth in Lending Act that requires all lenders, even those giving a bad credit payday loan, to behave ethically and make sure the customer is aware of every fee and payment schedules before signing the contract. The FTC will process your complaint if you think the act has been violated and some lenders have been prosecuted for racketeering this way.

The Solution

So where does that leave you broke and penniless? You can always rebuild your finances and credit score, no matter how bad your current situation is. The solution lies within your hands, not in a high-interest bad credit payday loan.

Make an appointment with a debt counselor and bring in all of your paperwork. Discuss what your total income is, what your major expenses are and how much you owe. Do not be embarrassed they have seen it all before, and know a dozen people who were in worse shape than you.

The debt counselor will work out a payment plan between you and your creditors that will let you steadily decrease your debt load, and then show you how to avoid getting into a similar situation down the road by managing your money responsibly.

The truth is that the interest rates are there to effectively cover the loan companies and help them turn a profit.

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You will be required to sign a contract when you are applying for your loan that agrees to the terms and conditions.

Yet both of them also have their downfalls as well. Another normal procedure is that they will just ask for your last paycheck stub which will prove to them the amount you get paid and that it will cover the amount borrowed. This could be a hassle for you in some aspects, but as long as you fully intend to be true to your word, and nothing else comes up, a savings account payday loan can help you in extreme situations.