| Unsecured Personal Loan Risk |
| By Credit Federal |
Published
02/7/2008
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Unsecured Loan
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Bad Credit People Risk Financial Security with Unsecured Personal Loan
Just as with any line of credit, the benefit of a cash advance, unsecured personal loan can be outweighed and pose a risk to financial security if not repaid timely.
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But often consumers place their personal finances at high risk by blindly agreeing to interest rates and fees, just so they can get quick approval and without first forcasting their ability to repay. In their hurried excitement to get cash to cover an emergency, pay bills, or for whatever reason, they fail to fully read and understand the terms, fees, rates, and how they will repay, or even if they can afford to repay. Maybe these personal loans should not have such easy approval in the first place?
Although they don't intend to do themselves financial harm, people generally find themselves in these bad situations by taking advantage of how easy some credit is to obtain and without regard to the costs. But the loans; and possibly the rates and fees, are not to blame. And though the high pressure of reassuring lenders may encourage people to borrow, it's not entirely their fault, either.
Mostly, people abuse credit because they want or need something, and they want or need it without first earning the necessary amount of money. Instead, they are so needy or eager, they are willing to pay to borrow money and to pay at a high cost if necessary. Case in point, short term cash advance loans. Why wait several months to earn the money needed, when a loan is available right now? So what if the loan is due in two weeks? Worry about it at that time.
People with a legitimate emergency cannot be fully blamed for abusing credit, particularly those with low income and who do not earn enough to adequately save money to cover such unexpected events.
If ever there is an occasion when a lender should be blamed, it's when the lender fails to clearly identify all rates and fees upfront, and doesn't explain what happens when repayment is late or if the loan is rolled-over. If those details are as clear as the loan itself, then lenders shouldn't be blamed for pushing high rate personal loans like cash advances. If a borrower enters the agreement and rolls-over the due date and extends the loan to a point where fees reach; or exceed, the principal loan amount, who's at fault? It could be argued that lenders are just doing their jobs of gaining customers, just the same as auto sales people.
Yet there are obvious problems with personal cash advance loans, as evident by some outright unscrupulous activities by some within the industry. For example, not helping a borrower fully understand that the loan is designed for a short period, and that over a long term the fees can pile up in excess of the original loan amount. And maybe when a customer is finally able to payoff a loan that has been rolled-over several times already, but the lender instead encourages the borrower to roll-over the loan yet again or to borrow more.
Consumers must also keep in mind, that a high risk loan not only means a high risk to the lender, but to the borrower as well.
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