I know that there’s a lot of negative vibes around the concept of bad credit loans. There are all sorts of misconceptions regarding this family of financial tools. They’re tools, and just like any tool, it can be used for good or can be used in a negative way. In of themselves, they are neutral. They’re just financial tools.
Unfortunately, there are so many misconceptions regarding these financial tools that it’s too easy to buy into them. It’s too easy to let them poison your decision making process and you end up, time and time again, screwing up.
Since I don’t want that you happen to you, I need you to get a clear understanding of what bad credit loans are and how they can impact you positively and negatively.
Keep in mind that positive and negative impact totally terms in context. In short, you have to look at the set of circumstances that you’re dealing with when it comes to a particular financial instrument, so you can see the probability of things ending up positively or ending up horribly wrong. So what are bad credit loans and why are they even an option for some people?
The first thing that you need to understand is that everybody can experience a financial emergency, maybe you’ll lose your job or maybe you develop cancer and you’re uninsured. Whatever the case may be, even the very best of us and the most financially responsible people can find themselves in situations where they need a lot of cash and this ends up draining their resources. They then take out loans and for some reason, or other, they can’t pay up at the right time. In short, they get bad credit.
Don’t for a second believe that just because you’re a responsible person that this automatically immunizes you from experiencing a financial snag that can drag your credit rating downwards. It only takes one bad situation, for even the most financially responsible people, to get bad credit. Don’t fool yourself with the thinking that you are above and beyond this situation, nobody is. That’s the reality.
Keep in mind that bad credit loans are necessary products. They are socially necessary. Why? If people who experienced financial snags in their lives can no longer get credit, then the US economy is going to hit a snag. This is a huge pool of people because even the most financially responsible people can hit snags every once in a while. In fact, even somebody who is just flooded with cash currently can experience a dry point in his or her life at some time in the future. It happens to the best of us.
If you were going to completely deprive these people of their ability to take out loans, then you financially isolate a significant chunk of the US population. This can’t help but have a negative effect on the financial system as a whole. Do you see how this works out? Do you now see why from a systemic perspective bad credit loans are necessary products? When you give credit to these individuals, they can then start making more moves, as far as their finances are concerned. This can’t help but spur the rest of the economy and this leads to a net social benefit.
Now that we have established that bad credit loans are not bad and are actually necessary, we need to ask a more important question. The question then becomes, “Are bad credit loans the right financial products for you?” Well, it totally depends on your circumstances. Pay attention to the discussion below because you need to take a look at you complete set of circumstances to make sure whether these financial instruments make sense in your particular personal situation.
Just like with any tool, you are sure to get a positive experience if you use the tool the right way. Bad credit loans have a proper purpose. They exist primarily to get you out of a tight fix. In other words, if you need to take out a loan and because of your bad credit you can’t get any other type of loan, these may be the financial instruments for you. However, they are short-term solutions. The moment you see your financial clouds clear away, you need to get out from under your bad credit loans.
In short, you need to train all your financial firepower on these loans. You can’t put yourself in a situation where you’re taking out one tranche of bad credit loans after another. In that situation, it can easily lead to a point where you become financially addicted to these loans.
You have to understand that if you are in a tight financial hole right now, it’s because you have certain spending and money-handling habits. These habits lead you to the tight spot you’re in. If you don’t let go of these habits and you keep taking out bad credit loans, this is a sure recipe for a bad ending. In such a situation, instead of bad credit loans digging you out of the financial hole you’re in, they actually enable you to dig an even deeper hole.
I hope you can see how this can take place. It’s like dumping gasoline on glowing embers. It’s not a good idea. You need to only take out bad credit loans if you’re sure you have overcome your old financial habits or you’ve resolved to do things differently.
Always remember that as much as possible, you need to look towards your income to take care of your financial needs currently. Look at bad credit loans as your last option. You have to remember that this is not free money. It’s far from it. If you thought your regular loans had a steep interest rate, bad credit loans are going to cost you even more.
Also, bad credit loans are often structured in such a way that it’s very easy for you to end up paying more, in terms finance fees and interest for these types of loans, compared to other loans.
This is why you should try to avoid them as much as possible. The same goes with credit cards issued to people with bad credits. This should be your last option.
Focus first on overcoming your old financial habits, getting your financial house in order, and establishing a short loan period for these loans. Otherwise, it’s too easy to get back into that deep financial hole you were in.