The need for a new car, the desire to own a home or a sudden emergency can lead to an unwise decision. Hasty choices are something to avoid when it involves borrowed money. The refusal to consider future ramifications can have dire financial consequences. Here are three examples of loans that have fewer requirements for acceptance but offer little long-term benefits.
Short term loans are something that anyone with a regular, provable income can receive. The largest amount offered for these loans is usually $1,000 or less, and some companies offer only up to $500. The lenders typically work with people that are in a financial bind and need immediate cash to repair a car, prevent disconnection of a utility, or another similar type of rushed situation.
There is government oversight of the loans and the lenders do explain the details on their websites about fees, interest rates and repayment dates. The borrowers that do not read the details could get themselves into even more financial trouble. The lenders do not make certain the borrowers have the means to repay the loans, and the repayments can begin the following week.
The amount is often due in full, along with the fees, in a month or less. Someone that lives paycheck to paycheck will struggle to pay the interest rates that basically amount to a 400 percent annual interest rate, according to the Consumer Financial Protection Bureau.
Adjustable Rate loans
Borrowers that seek out larger loans and want a faster option than many mortgage lenders offer, will typically look at adjustable rate loans for a more efficient response and a lower initial payment. Some people benefit from an adjustable rate loan, specifically those that know they can pay off the amount or refinance within a few years when the interest rate increases. The loan is also for borrowers secure in their ability to stay employed at the same salary, or higher with a large savings account.
According to the financial experts at the Motley Fool, many people do not have the stability or savings for this to be the right loan choice for them. The instability of the real estate market and the job market can affect anyone, as can a period of financial insecurity due to a job loss. A fixed-rate mortgage makes it much easier to ensure an emergency savings account can cover expenses if a job loss. It is impossible to have that type of certainty with an adjustable rate loan.
Overdraft Protection Loans
Banks offer overdraft protection loans to many of their customers. The interest rates are often fair and there is no need to apply for credit with every use. It may sound as if this is the perfect option, but there are concerns.
Many banks charge a fee in addition to the interest on the borrowed amount. The fee is for every use of the account. For example, a bank customer that continuously uses their debit card over a weekend without the realization of their overdrawn account could face dozens of individual fees.
A bank may also cancel the account of a customer that overuses overdraft protection, and this could result in returned checks is some had not cleared at the time of the closure. Instead of relying on overdraft protection to get through a financial difficulty, visit a site like Loan Review HQ to see all the options available.
A few extra hours spent to review the loan options available can save borrowers a lot of money. The fees and interest rates between different lenders can vary even on the same types of loans. Always check all options before a final making and final decision.