Bad Credit Personal Loans Versus Credit Cards And Payday Loans
Posted in Loans on February 16th, 2010 by Jim – Comments OffConsumers with bad credit have limited options when it comes to finding cash. Bad credit personal loans, payday loans, and bad credit cards may be able to help. Small personal loans are commonly issued by lenders in exchange for high interest rates and fees.
Which type of loan is your best option?
Credit cards are usually easier to get, but they may not provide you with a high spending limit like the personal loan will. Payday loans cause you to borrow money from your next paycheck so if you don’t have the funds to repay the loan in 14 days, you better look at your next option.
How much cash can I get?
Depending upon how bad your credit is, most bad credit personal loans will start at about $500 and move up toward $6,000 or more. With a credit card, you may start at $500 and the line of credit will increase as you demonstrate credit worthiness through timely payments and keeping the balance low on your account.
What will the interest rate be?
Since you know your credit situation is less than desirable, lenders will take this opportunity to charge you for it. Be prepared to pay about 29% for any ATM withdrawals with a credit card. Your interest rate for a small personal loan will start at about 12%, but most see it begin at 22% or higher. Payday loans charge interest rates of 300% because they are designed to be short-term loans. If you extend a payday loan beyond 14 days, you will start to accumulate a large interest rate.
Do I need collateral?
Small unsecured personal loans do not require collateral, but it can help to reduce your interest rate if you do decide to front something like your car. Collateral reduces the risk the lender is taking by offering you the cash so it’s always a good idea to go in with some type of collateral as bargaining power.