Tips to Avoid Bad Personal Loans |

Personal loans are used to pay anything from an emergency room visit, to car repair, or even buy groceries when money is tight. In fact, most people will require a personal loan at some point. It is not unusual for people to take out several personal loans throughout their life, but when do they become dangerous?

Bad Credit Loan Gone Bad
Recently, it was reported that a woman was looking for a loan. She did not have bad credit but responded to an advertisement for Yes Loans. They specialize in bad credit loans or payday loans here in the United States. When she figured out what it was, she canceled the service. However, she had already given them her information. About a week later, she received a letter saying she could get a loan for £3,000 at a 49.4% interest rate. She did not want it and destroyed the letter. Ten days later, the loan company took out £69.50 from her account. While she eventually got the money back, it was quite an ordeal.

3 Tips to Avoid Bad Payday Loans
When it comes time to borrow some money, the best bet is to go with the most traditional route possible (i.e. banks, family, or friends). However, if you have bad credit, this may not be an option. If you must get a payday or cash advance loan, then watch out for these three things.

Third Party Lenders – While it is not necessarily bad, when you deal with third party lenders, your information will get passed around. Again, the company may be legitimate but you never know where they are sending your information.

Hidden Fees and Charges – Bad credit loans have a high enough interest rate without your having to pay all kinds of fees. Like low interest credit cards, it is not unheard of for the interest to skyrocket even if you are just one day late. Also watch out for late fees, early payment fees, and service charges as these can really add up.

Automatic Withdrawal – Cash advance loan companies would like you to believe you must have a checking account to use the service. This is so they can withdraw the money right out of your account. To avoid overdraft fees and the like, use a savings account that they cannot make a withdrawal from.

Seeking a personal loan is not always a bad thing. However, you need to know what you are getting before you sign on the dotted line. Therefore, read the contract, look for interest rates and fees, and make sure you understand what they are offering.