Considerations About Different Types Of Loans

A man is calculating the interest rate for payday loans
Do You Need A Payday Loan?
Part 1 Short Term Loans In The USA
Part 2 What To Consider About Different Types Of Loans
Part 3 Easy Cash Loans – The Benefits Of Payday Loans
Part 4 How To Save Money And Manage Your Debt

It is worthwhile looking at some of the kinds of lenders who prey on vulnerable people who are in desperate need of funds. The good news about legal payday lenders is that they must be licensed and the loans offered are fully regulated. Some of the other options open to people who are unable to access mainstream lending may simply be operating abusive practices. Loan sharks, pawnbrokers and unlicensed lenders often use fraudulent practices that cause borrowers to end up in debt. In this article we look at:

  • Lenders who prey on the vulnerable
  • Secured short term loans
  • Loans from pawnbrokers
  • Pros and cons of genuine payday lending

Lenders who prey on the vulnerable

The reason why some lenders are unconcerned about low credit ratings is because they want people to stay in debt. This is the way that they can maximize profits utilizing high interest rates, unfair terms and excessive charges. A lender who consistently offers extensions to a short term loan is not doing so out of the goodness of their heart. They are simply keeping you entrapped in debt for longer in order to make more money. The targets for these lenders are the low paid, the elderly and those with no job security.

Secured short term lending

Short term title lending

Secured short term loans are offered by pawnbrokers or lenders who take the title ownership of an automobile. If you default on the repayment you will lose the goods you placed as collateral and if this is your car, the lender can simply take it and sell it to cover the debt.

A man visits a secured short term lender to apply for a loan

Just like payday lending, short term lending that require the title to goods are granted at excessively high interest rates. Additionally, lenders who take the title of a car as collateral for a loan will often only offer a sum equivalent to less than 50% of the value.

Loans from pawnbrokers

In the same way, pawnbrokers offer only a small percentage of the value of a personal item that is put up as collateral. A piece of jewelery valued at $2,000 may only result in a loan of $100. Pawn shop loans can be organized without any credit checks because the lenders know that they can recover any losses and make a profit by selling on the pledges.

Benefits and drawbacks of genuine payday lending

Payday lending has had a lot of bad press and some of it has been justified. After the financial crisis there was a huge increase in this type of loan with many unscrupulous lenders taking advantage of people who had already suffered by losing their homes and jobs.

After the 2008 financial crisis there  was a huge increase in payday lending

Federal regulations have put a stop to most of the worst practices in the industry and each state has different rules that apply to short term borrowing. If you are considering a payday loan it is important to look at all the benefits and the drawbacks before you sign an agreement.

Do You Need A Payday Loan?
Part 1 Short Term Loans In The USA
Part 2 What To Consider About Different Types Of Loans
Part 3 Easy Cash Loans – The Benefits Of Payday Loans
Part 4 How To Save Money And Manage Your Debt

About the author

Mark Larsen

Mark Larsen has worked in the finance industry for over 20 years. Over the course of his career, Mark has amassed experience in personal finance and especially short-term lending. He shares his valuable insights on onlinecreditusa.com