There is a huge sub-prime lending market, and no matter what happens, it continues to grow. A major part of this boom is alternative financial services that cater to certain targeted customers. These services supposedly help people with less than perfect credit secure emergency cash and certain products that they either need or want. There are many things to be careful about when dealing with these lenders, so consider the following helpful advice.
Before diving into the specifics of certain services, it’s imperative that you understand the dynamics of alternative financial services and who uses them. These financial services are catering to people with poor credit who need loans or can’t afford certain items that they either need or want to have. Maybe a person’s car breaks down or the light bill is due, and they can’t afford it. This creates situations where these services offer something that is supposed to benefit both parties. Continue reading to see why it doesn’t.
Payday loan lenders cater to people who need emergency cash. The problem is the interest rates charged on these loans are extremely high, and people usually default on the loans. They aren’t good options, but people go for them because they are available and seem like the easy way out. They get stuck in a situation that just makes their personal finances worse.
Rent-to-own places offer people furniture and high-end electronics that people can’t afford, but they charge by the week and sometimes according to other terms like every other week or monthly. Therefore, someone can walk out of the store with a big screen TV having only paid fifty dollars. However, these people just signed a contract that will be hurting their monthly budget for a long time.
Auto title loans are supposed to be safer than other alternative financial services. Many people fall into the trap of thinking that they are, but this is an advertising strategy that deceives even more people. The idea is that your car is used as collateral. That is all fine, but many people end up losing their car or owing money as well as losing their car. The reason for this is the interest rate and terms are usually horrible, and people can’t keep up with the loan. Therefore, they lose their mode of transportation and sometimes end up even owing more money on top of that.
There are some bad mortgages out there on the sub-prime lending market as well. Before the housing bust, there were interest only mortgages, and you have to watch for adjustable rate mortgages as well. They entice people who have poor credit with a lower interest rate, and then all the sudden the interest rate is allowed to jump where people can’t afford their payments.
Alternative financial services are supposed to provide solutions to people with poor credit, but it truly isn’t the case. They end up making things worse for the consumers. Remember the tips you’ve read here as you are approached by these types of lenders.