As much as possible, we all avoid going into debt. Unfortunately, loans are necessary to be able to get big ticket items we need, and we have to look for good loans that will help us improve our lives in the future, and not cripple you financially while you are paying them off. And while there are a lot of loans available, there are some loans that are just terrible to get into. When dealing with loans, try to see beyond the shiny dollar signs they are waving at you and look at the details. To help you, here are the top 10 worst types of loans you could get into. If you see one like this, start walking away, and try to stay away from them as much as possible, or entertain them but only as a last resort.
1. CREDIT CARD CASH ADVANCES.
These are very available loans since you won’t need to fill out any paperwork and you are practically approved to take the loan. As easy as it is, it is also a very expensive loan. You will pay a fee of $10 to $20, and you will pay additional interest rates on top of your credit card rate. This is one of those only in emergency loans you should consider.
2. INSTALLMENT LOAN.
This type of loan usually targets small figures, with loans offered at $1,000 usually. This can be paid for as long as a year, but have high interest rates. These are small loans that can balloon into giant debt if not managed properly.
3. PAWNSHOP LOANS.
You have seen this store on TV, and you see how the owners make a killing on pawned items. Pawning your valuables as collateral seems okay, but in truth, you are pawning them for less than standard market value, high interest rates, storage fees, and other charges that will give you a hard time paying them back. You might end up paying for the interest and fees and not for the actual item itself, and end up losing it.
4. LOTTERY LOAN.
This used to be a favorite scam targeted at those who win lotteries and jackpots. Companies will claim to buy your winnings and promise to pay the rest in payments but will not. You end with just a fraction of your winnings and end up being scammed. Most states now offer lump sum payments on winnings, though, so this is not as popular a loan as before.
5. CASINO LOANS.
Casinos will offer you interest-free lines of credit for gambling. These loans are also free of any fees or charges. They are betting (pun not intended) on you to lose that money. These casinos can loan you so much, and when you lose big, have the ability to put liens on your home and other properties if you cannot pay. This can be the beginning of a dangerous debt situation. You should only entertain these loans of you have the money to pay for it.
6. OVERDRAFT LOANS.
Overdraft protection is a program offered by banks to allow you to withdraw funds or write checks even if you do not have money in your checking account. This protection comes with a hefty $35 fee, and will do so for every single transaction until your balance is more than $0. You might be better off with a payday lender than this. And these overdrafts are just charged to your account and are hard to contest.
7. PAYDAY LOANS.
These are the helpful lenders that can assist you in making it until the next paycheck comes. Do not be fooled, as a lot of people have fallen victim to this type of loan. These loans have high interest rates, and allow people to roll their loans over, starting a long cycle of debt where loaners start getting trapped and will end up with a lot of debt.
8. CAR TITLE LOANS.
This is one of the worst loans you could get. They offer you instant money for the title of your car, high-interest rates, an incredibly short time to pay- usually 30 days. They can repossess your vehicle if you fail to pay. And what makes this a dreadful loan? You might lose your car for just a fraction of its market value.
9. TAX PREPARER LOAN.
We are all more than eager to get rid of tax problems, and the worst way to do so is to get a loan. These are refund anticipation loans or personal lines of credit, and you get slapped with double-digit interest rates and a lot of fees. Don’t even try this.
10. PRIVATE STUDENT LOANS.
You have less flexibility with private student loans as opposed to federal loans. You can also apply for restructuring and forgiveness programs through federal loans, and this type of loan may be the beginning of your debt.