Issues concerning bad credit loans
Students and bad credit
Paying for a college education is an expensive business and many students, including those of us at Hampshire College, find themselves having to take out student loans on top of their federal student loan to meet all their financial obligations and commitments.
It is, of course, vitally important that you keep a check and control on your finances in order to avoid getting into a situation where you owe more than you know you can comfortably afford to repay. Taking out loan after loan might provide you with the things you want, but do you really need them.
If something’s not essential for your studies or day to day living in Western Massachusetts - have a good long think as to whether you really need it and can afford it. For instance do you really need to spend a holiday abroad? Why not enjoy the local sights of Hampshire? This can be equally fascinating. And taking out another loan to buy something that is non-essential simply adds to the debt you owe, if your debt gets out of control you could end up in a bad credit situation.
What is bad credit?
The term bad credit actually refers to your credit history, sometimes called a credit report. You should obtain your credit report before you go out and start searching for a loan.
If you fail to keep up with the repayments on a loan or default on that loan you could have a bad credit history recorded against you. This means that if you then want to take out another loan, seeing that you’ve a bad credit history, the lender may well refuse the loan application.
If having tried several banks or money lenders you still can’t get a ‘normal’ loan, because of your bad credit history, you might have to apply for a bad credit loan instead.
Bad credit loans
Any bank or money lender is taking a risk when they lend you money, they might never see or hear from you again and they’ve lost their money. Of course that’s not usually what happens.
The vast majority of us honor our loan agreements or at least do our best to pay them back. A bank or money lender giving you a bad credit loan is, of course, taking a greater risk as you’ve already failed to meet the repayments on another loan.
Your bad credit history is saying to the lender - beware! To compensate for this higher risk the lender will charge you a higher than usual rate of interest and/or might even insist that the loan is secured by some collateral that you have - perhaps your car or an endowment that is yet to mature. ie. Default on a bad credit loan and you could well lose something or even greater value!
Issues to consider with a bad credit loan
As a student having to take out a bad credit loan is not a good thing. You’re already in debt, you most likely can’t meet the repayments you’re already committed to and yet you’re considering another loan.
There are student debt counseling services, you can access in both Hampshire College and the wider Western Massachusetts community, that might have an alternative solution to a bad credit loan. Also, student debt counseling can help you come to terms with your spending patterns and help you avoid overspending in the future.
Having said all that and you’re still in desperate need of a loan and have no option but to seek a bad credit loan, you will find plenty of companies willing to offer bad credit loans both in paper adverts, yellow pages and on the internet.
Obviously do shop around and find the best bad credit loan deal that is available at that time. Ask advice and opinions from other people about what they think of the company you’re thinking of taking the loan from.
On a like-for-like basis whilst a secured loan might have a slightly lower interest rate, you might well have more to lose should you default on the bad credit loan. Finally don’t forget that, the man in the suit has just bought a new car on the profit he makes from your dreams.