If you have a bad credit score or a troubled financial history than you will be more than aware of the difficulties of borrowing money. The problem is that when in need of money many of us will have no choice but to borrow from the few options we have which may turn out to be a costly mistake. Here are some of the most costly ways to borrow and once to avoid at all costs.
The famous payday loans which are advertised on our TV’s in which companies boast about a quick and easy service provide customers with a cash advance on your monthly salary. These are very tempting as indeed the applications are not difficult and the cash reaches your account within minutes. Further to the benefits, no credit checks are conducted meaning that anyone can in reality obtain a quick loan.
This lucrative quick and easy scheme of course however does not come cheap. The risk of lending to those less fortunate in society is covered by a high interest rate cost. In most circumstances lenders will charge you a staggering £25 per every £100 borrowed which adds up very quickly. The typical loan which may be £500 will cost the customer £125 in interest rates which is conditional on them paying back the loan in the first month.
A loan shark is a person who illegally lends money without a licence. Loan sharks informally provide those in need with an informal loan meaning there is no paper work no credit check and no easy way to keep track of how much money you have left to pay. In addition, interest rates are often sky high and loan sharks tend to add charges whenever they feel like doing so. Further to add to the displeasure, if you are having difficulty with keeping up with your payments, loan sharks are known to use threats and violence to recoup their money.
High street pawnbrokers lend you money in return for a security which you leave with them which is of a higher value of the loan you are taking out. The downside to this method of raising money is that you will be charged a high interest rate in addition to the risk of losing your higher value item which you left behind as security.
There are better ways
Having listed some of the worst ways to borrow money we are inclined to also include some of the better alternatives which are available in the market. An MBNA Platinum credit card allows you to transfer part of your limit into a bank account which you can then withdraw as cash. This alternative is much more lucrative as it will give you 23 months to pay back the amount at 0% interest. There are also other similar schemes out there, but when considering any type of loan, you must be wary of the consequences which the lender will impose if you are unable to pay back the money within the specified time.