What You Should Know About High-Risk Personal Loans

The state of the economy and high unemployment have made the last few years especially challenging for most Americans. Nearly everyone has been affected in some way by the ongoing recession and sluggish housing market. If you have been using credit cards to help make ends meet every month, you are not alone. More than ever, consumers are maxing out their credit card balances in order to keep up with higher prices at the gas pump and the grocery store.

Few people have an emergency fund to draw from when an unexpected crisis occurs. It could be an unplanned medical expense, an urgent car repair, or a new refrigerator. Whatever the reason, if you are living from paycheck to paycheck, any out-of-the-ordinary situation that requires extra money is going to put you in a shaky financial position.

High-risk personal loans of $5,000 or more can be an option if you need immediate cash and have no savings to use. These loans are generally available to people who have a poor credit history, low credit score, and no collateral to offer to a creditor. Because of these factors, lenders usually charge extremely high interest rates to anyone getting this type of loan.

There are some advantages to using a high-risk personal loan when you need emergency funds. Even though they come with a high interest rate, if you pay the loan back fully and on time, it can have a positive effect on your credit report. These loans are also very easy to apply for and require very little paperwork and only general personal information. Plus, you normally have a decision in a short amount of time.

Because these high risk loans generally require no collateral or co-signer, the funds are paid to you (upon approval) within a day or two depending on when you apply. If you are in desperate need of cash, this can be a big advantage to using this type of loan.
There are some disadvantages to high-risk personal loans. You can expect to pay above average to extremely high interest rates on your loan. Since you have a less than perfect credit history, you will also be charged higher application and processing fees.

Advantages of a high-risk personal loan

- No co-signer is required.
- Bad credit history is not a problem.
- Much easier to obtain than a bank loan.
- Funds are available quickly.
- Chance to improve your credit.
- Simple, short contract agreement.

There are some serious disadvantages

- Extremely high interest rate and processing fees.
- Your credit can be damaged further if you default.

As with any loan agreement, it is important to read and fully understand the contract you are signing. Don’t sign any contract that has blank spaces in it. Make sure it is completely filled out before adding your signature. You should be aware of all the details of the loan contract and be certain of the consequences if you have a problem repaying it in the time agreed to. Finally, if you don’t understand something, ask.