When it comes to getting a loan with bad credit or no guarantors, there aren’t many options left for a person to turn to. But where you become ineligible for a lot of different kinds of loans, there are some loans you may be able to get easily even with bad credit. Among those options, the most common types of loans people opt for include Payday Loans and Loan Sharking. They are certainly easy to get, but are easy to payback? Let’s have a look at what loan sharks and payday loans are and should you go for them or not.
When it comes to loan sharks, they are nothing like a bank. In fact, they are unlicensed moneylenders who look for people struggling financially and take advantage of their situation. Loan sharks may lend you a loan easily, but they will charge you extremely high-interest rates. Any money lender that is not licensed by the Financial Conduct Authority is a loan shark and is operating illegally. If you somehow end up getting a loan from a loan shark, then you can face several challenges. There are no official agreements that favour you. You will get a loan on bad terms, high interest, and if you fail to pay it on time, you will be harassed. Some loan sharks force you to get a loan for a loan when you fail to make payments, and that just sends you down a ladder that gets harder and harder to climb. It is highly recommended that when you are in financial trouble, you explore other options as there are other types of bad credit and no guarantor loans, you can find out there.
What Happens If You Borrow Money From A Loan Shark?
When you take a loan from a bank or a licensed loan lender, you are in a mutual agreement with them and are contractually obligated to pay the loan back as decided. You can read the fine print and can understand what you are getting involved in and what kind of problems you can end up facing. But you get a loan from a loan shark you are not legally obligated to pay them back. They are not licensed by the Financial Conduct Authority, which means it does not give them any legal power to recover the debt from you. Most of the loan sharks use fear to motivate the borrower to pay back the loan. If you find yourself in such a situation, it is highly recommended that you get in touch with the local trading standards office and register a complaint.
What Happens if You Fail to Make Payments to Your Loan Shark?
If you fail to make payments to your loan shark, they may simply start harassing you and make your life difficult. They may pay you unannounced visits and will threaten you to take away your possession. In extreme cases, some loan shark may also threaten to hurt you physically. It is important for you to understand your rights and know that if any loan shark harasses or threatens you, they are breaking the law. If the situation gets out of the hands, you should immediately contact the authorities.
The verdict on loan sharking is that you should avoid it at any cost. There are always other ways to get money even when you feel like you have no options left. Just make sure whatever loan you are borrowing is safe and would harm you financially or mentally in the future.
The other types of loans people go for when they have bad credit are payday loans. Unlike loan sharks, payday loans are completely legal and are offered by many reputable loan companies. They are short term loans that you get for an emergency or to pay bills and have to pay back in a matter of weeks. But while they seem convenient and you can get them in a matter of hours, they have their drawbacks as well. Here are a few cons of payday loans that you must keep in mind before getting one:
Payday Loans Charge Expensive Fee
One of the main reasons to avoid a payday loan is that it charges a very high fee. If you are struggling financially and you are already living hand to mouth, then it is probably best for you to not get a payday loan. If you fail to pay it back in time, it will go to the collections, or you will have to ask for an extension with some extra fee. The loans keep on rising, and before you know it, a small loan has turned into a big debt. Some people even have to get a payday loan from other loan companies so they can pay back the previous loan.
You Can Get Stuck into Debt Cycle
Most of the payday loans in the UK are to be paid within two or three weeks, but a lot of people take longer than that to pay back the loan. Due to the high fee and the inflating interest rate, it is very easy for a person to get caught in the cycle of debt. Also, with payday loans, you can get cash in your hands within hours, and it can become a bad habit for you. You will start taking payday loans even for the smallest of emergencies, and before you know it, you are in the debt cycle that you won’t be able to stop.
There are Better Ways to Get Cash
There are other ways of borrowing cash that is even easier than getting a payday loan and less expensive. For starters, you can always consider getting a loan from a family member or a friend to whom you can pay back later without any interest. But if you don’t feel comfortable asking a family member for a loan, you can consider going for no guarantor loans, unsecured loans or personal loans as well.