“I realized I can get loans from $500 even if I have bad credit when I defaulted last year because I was out of work. I’m back at work now and my income is a lot steadier at the moment. Of course the banks still won’t give me a loan, but I noticed that some lenders cater to my kind of situation. Can you tell me about the advantages and disadvantages of using these types of loans?” – Randy, Reno, NV
The clear advantage, Randy, is that you can take out a loan with these short-term loans, which are also popular in the UK and Canada in case you think your situation is uniquely American. Unlike with banks, loans like 500 dollar loan with bad credit today are open for anyone who has a steady job. Applying for this loan is easy and fast: you just fill up an online form, provide your basic personal, work and bank details and the lender transfers the cash at once.
But just because you can do this doesn’t mean you should. Consider the advantages and disadvantages of these types of loans.
- You don’t need a collateral or security to get a loan. As long as you have a steady income, either from work or a business, lenders are willing to give you a quick approval. Generally, a proof of income like utility bills, pay slips, or bank record is all you need to get the loan.
- There’s no middle man or agent to get the loan. Applying for loans like a 500 dollar loan with bad credit today is often done online bypassing the need to talk to an agent. Credit-matching sites or loan search sites can help you search for the best loan product for your situation. You can even compare loans based on amount, interest, payment period and other conditions from the comfort of your seat.
- They are ideal for emergency needs. Things like car accidents, house repair, or hospitalization cannot wait while you scour for that extra cash. In fact, loans like a 500 dollar loan with bad credit today are designed for these situations. Many lenders are even offering same-day approval targeting people who need cash for an emergency.
- Payment is easy. Options include auto-debit on your card, paycheck, or bank account. If you have a regular, predictable income like a salary, this means your loan will be paid back at once. This prevents you from delaying the payment and lets you avoid the penalties and default fees.
- The interest and penalty charges are high. That’s because a 500 dollar loan with bad credit today doesn’t require collateral. What the direct lender lacks in security, he makes up by charging you with a higher fee. It’s a fair arrangement given that banks won’t even entertain your loan requests.
- If you’re not careful you can easily fall into a debt trap. Since the interest is high and the penalties stiff, failure to pay on time can quickly result in a debt spiral where you end up paying more on the charges than on the principal. USA.gov shows a simple calculation how a $100 loan can easily bloat to $490 in a year. That’s almost 400% more expensive than the principal. To ensure you don’t fall into this trap, pay loans like a 500 dollar loan with bad credit today on your next paycheck; don’t wait it out until it racks up further fees.
- You can fall prey to unscrupulous lenders. Since application is mostly done online, it’s easy for illegal lenders to lure unwitting borrowers to their site. To protect yourself from scammers, make sure to deal only with legitimate loan search sites. Do a simple background check by googling the lenders’ names. You can take it further by checking if the lenders are registered with the State Department of Financial Institutions.
If you feel that payday loans are not for you, there are alternative personal loan products, such as salary advance from your employer, loans from friends or family, and social service agencies. The Center for Responsible Lending explains how each of these options can work out for you.
Not all situations call for you to take a bad credit personal loan, in the same way that not all situations call for you not to. When you do, just make sure the advantages outweigh the disadvantages and not the other way around.
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