Realizing The Bad Side To Alternative Financial ServicesPosted at by ifydcat on category Personal Finance
In recent history, there has been an ever-increasing expansion of the sub-prime lending market. All kinds of alternative financial services have surfaced throughout this time period. These services are known for assisting people with bad credit obtain financing terms for items they need or for loans. Many of the sub-prime lending agreements when dissected are just horrible. This article contains some helpful advice that you should know.
The alternative financial services are targeted at people with poor credit and no other options. While they seem to provide a service to people who would be thankful to receive a service they can’t get otherwise, the terms for these alternative services are generally horrendous.
Payday loans will charge you an arm and a leg for a small amount of money. People take out payday loans with a promise to pay the loan back the next paycheck with a substantial fee for interest. Due to the nature of the loans and the people securing them, many people find themselves renewing the loan every payday. You see, the payday loan lenders allow their customers to just pay the finance charge each paycheck and they can pay on the principal amount later. Counting a few other rules and regulations, a customer can end up owing many times the amount of the original loan.
Rent-to-own places charge people an arm and a leg for things they can’t afford. They shove these big new products in people’s faces, and then tell them it’s only this one low price per week to rent-to-own the product. By the time they’ve paid the product off over 1 or 2 years, they have paid a few times the price of the product if they were to have bought it out right.
Auto title loans work similar to the way payday loans work, only you make payments once a month. You are eligible to just pay the finance charge and leave the principal alone for several months. You can just imagine how much that makes you end up paying these companies. Title loans are secured by the title of your car, so if you fail to pay, they can seize your vehicle.
Interest only and adjustable rate mortgages became extremely popular during the real estate boom. Can you imagine just paying the interest on a mortgage? People were tricked into these loans, and traditional mortgages already take years upon years to pay off if you just make the payment amount each month. Adjustable rate mortgages are capable of hiking up your payment at a moment’s notice to a price in which you never realized you couldn’t afford.
Alternative financial services are supposed to offer useful services to society, but what makes them able to do that ends up actually hurting the consumers more than helping them. Signing up with one of these companies automatically causes you to be ripped off. Remember the tips here, and if you do choose to use alternative financial services, stay away from things that will harm you in the process.