There are many options available for bad credit loans. However, the abundance of options does not necessarily mean you should jump on the first kind of loan you come across.

Even with bad credit, several types of loans are safer and less risky than others. To find the right kind of loan that will not financially destabilize you, you need to avoid certain bad credit loans. Here are some sketchy bad credit loan types that you should avoid while looking for a loan.


Kinds of Bad Credit Personal Loans to Avoid

1.    Pawn Shop Loans

Pawn Shop loans are hard to resist for people with bad credit. It’s a simple procedure without any background checks or credit score inquiries. It might sound appealing to exchange one of your belongings for some money from your local pawn shop. However, there are many risks to it as well.

Pawn Shop loans keep an item of yours till you repay the loan. The item must be worth equal to or greater than your loan amount. If you fail to repay the loan within the specified term, the lender can sell the item and keep all the money from the sale.

Besides that, pawn shops have really high-interest rates and several other fees, including storage fees that make the loan even more expensive.

2.    Car Title Loans

Everything about a car title loan is risky. You put a car that you’ve already paid off or are in the process of paying off as collateral for a loan with about 200 to 300% annual interest rate. Something as valuable as a car should never be used as collateral for a loan because lenders inflate the APR to make it hard for you to pay back the loan.

Once you fail to do that, your car is no longer your property. You should avoid loans like these at all costs.


3.    Payday Loans

Payday loans are another trap to keep the borrower within a vicious cycle of debt. Payday loans might sound like a relief, mainly because they don’t require any credit score minimum, do not check your credit history, and you can get the loan as soon as you’re done with your application.

This is where the enticement ends. Payday loans are made for under $500 and have to be paid by the borrower’s next payday. This might seem like a great idea, but payday loans come with really high interests that keep the borrower indebted to them for a long time. For this very reason, many states, including Arizona, New York, New Jersey, Vermont, and Pennsylvania, have completely banned payday loans.



When looking for a personal bad credit loan, it is crucial to figure out which loans are safer and easier for you to pay off. Getting a quick cash transfer only to be indebted by high-interest rates and insecurity of personal possessions is a bad idea that can lead you to a worse financial crisis. Stay away from all the loans mentioned above and analyze all loans and their interest rates before getting down to business.



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