If you’re struggling to pay your bills, you’ve probably put some thought into the idea of taking out personal loans for bad credit borrowers, but the fact is that all this is likely to do is make your credit rating worse.
When you take out personal loans for bad credit, you will probably find that the lender charges punitive interest rates – because they know that there is a high chance that you will default. So, you borrow a small amount of money, but you end up paying far, far more back.
Many of the companies have low requirements when it comes to deciding who to lend to – but that’s because of those high interest rates. They’ll suggest that you roll over the amount that you’re borrowing – taking out bigger and bigger loans as time goes on, until you fall into a trap where you just simply cannot pay the money back, at which point your only options are to default and enter into an arrangement, or face legal action.
There are some scenarios where taking out personal loans for bad credit can be a good idea. If you need a car to travel to work, it’s broken down, and you cannot borrow money from a mainstream lender or from friends and family, then finding the absolute cheapest way of getting back on the road, and then borrowing to facilitate that makes more sense than losing your job. The same could be said for health care if you genuinely cannot pay in any other way. But for discretionary spending, the best approach is to spend less and try to save or find other ways to get the things that you are looking for.
If you’re trying to repair your credit rating then there are better ways of doing so than borrowing from an expensive lender. Look at joining a credit union, or even getting a secured credit card and then using it only for spending that you can clear at the end of each month. Over time, managing that account well will help you to build up a stronger credit rating and you will have a better chance of getting a loan from a lower interest, more mainstream lender. It’s easier than you think if you are patient and systematic, and eventually you could have a strong credit rating to work with.