When people resort to bad credit installment loans, they often do so because they’re in a tough financial spot. While middle-class and wealthy consumers generally have access to several borrowing sources, those who are on the low side of the annual income scale are usually forced to borrow money from payday loan and installment loan lenders. However, bad credit installment loans are not the only possibility – a bad choice isn’t the only choice. There are other ways to get money, ways that don’t involve a loan shark or the selling of one’s soul.
A Bad Choice Isn’t the Only Borrowing Option for People with Poor Credit
Greg McBride, a chief financial analyst for Bankrate, said, “Consumers who turn to payday loans don’t have access to avenues that middle-class consumers might tap, like opening a home equity loan or borrowing from a retirement account. Many have limited access to credit or don’t have a bank account.” While McBride referred to payday loan borrowers in this statement, the same can be said for those who take out installment loans for bad credit borrowers.
Taking out an installment loan isn’t the only way for those with bad credit to get money. Other options are available. However, when it comes to needing cash, people should try to avoid being in a rush to borrow money. Those who hurry into a loan are more likely to end up in a bad deal. Instead, they should search for alternatives.
What is a Bad Credit Installment Loan?
According to NerdWallet, installment loans are borrowing options that land somewhere between personal loans that banks lend out and payday loans. They’re like personal loans because borrowers repay them over several months or a year, but installment loans also have similarities to payday loans because they are usually for small sums, have high interest rates and multiple fees.
Diane Standaert, the director of state policy for the Center for Responsible Lending, said, “Just because it’s marketed as an installment loan doesn’t mean it’s safe. Any loan that carries such high costs and is made on such unaffordable terms puts people in a worse financial situation.”
Alternatives to Installment Loans for Bad Credit
When consumers find themselves short on cash, they should first consider alternatives to installment loans for bad credit. For instance, selling unneeded apparel items or unused household goods may be a better option than taking out a small loan.
If a loan is unavoidable, CNBC advises potential borrowers to pull their credit scores to determine whether they have bargaining power. Since installment loans are convenient, many borrowers turn to these lenders first without checking the options that may be available from a bank or credit union. Some traditional financial institutions are beginning to offer small short-term loans that feature manageable interest rates.
An employer may permit an interest-free advance on an employee’s paycheck, but a worker should first consider the risks. This step could put the borrower out of the running for a promotion simply because financial problems can make a person appear less trustworthy.
Investopedia reports that churches and community organizations sometimes offer emergency financial assistance. They may help a cash-strapped individual cover utility bills, pay for groceries or even make a car payment. Borrowing funds from family members or friends is another alternative to bad credit installment loans as is taking out a loan from a life insurance policy.
Peer-to-peer lending sites are now a thing, and often, these lenders offer more affordable rates and acceptable repayment terms. Consumers can also use the internet to learn how to repair a damaged credit score to gain access to better lending opportunities in the future.
How to Boost a Paycheck to Get By
Several apps can help those who are strapped for cash. For instance, one app balances out uneven paychecks with advances that are interest free. Users of this app will pay the advance back with their next paycheck. The app charges a $3 weekly fee after its 30-day free trial period.
Another app gives users early access to their paycheck. This program is based on the hours that a person has already clocked with his or her company. When payday arrives, borrowers will pay back the advance. The charge for this app is up to the borrower, so he or she can decide how much to pay for the service.
The Best Alternative to Bad Credit Installment Loans
A bad choice isn’t the only choice when it comes to cash-strapped moments. The best alternative to bad credit installment loans is to prepare for financial emergencies by putting aside a little extra money whenever possible. If this is simply unmanageable, then other options exist. To learn more about the many borrowing opportunities that are available, visit the Personal Money Store.