The following is a guest post.
Outsmarting the system isn’t easy. When it comes to outsmarting businesses that make money offering high interest loans to low income earners with bad credit, it’s nearly impossible to maneuver around the contemptible contracts and reprehensible rigmarole. It’s not that we should want to vindictively “go after” these companies – they’re just running a business like everybody else. But there should be a way for the odds to pull a little bit more toward the favor of the borrower, even if it means a little convoluted credit exchange.
The auto title loans Los Angeles and other major American metropolises have to offer are almost always attached with APR percentages that make our fiscal heads explode. Payday loans are no different, and nor are credit cards given to those with little to no credit. The defense is understandable. These borrowers can’t afford to lend money out to individuals with bad credit ratings without the added excessive interest. It encourages these individuals to pay their debts back in time and allows for fewer losses for the lender in the event the debt can’t be paid back in full.
But problems arise when we stop and consider those who have bad credit histories yet have learned from their mistakes. For such people, improving credit is nearly impossible since in order to do so they must first take out new lines of credit, which is just as impossible to accomplish with bad credit. These individuals have no interest in taking out car title loans, payday loans, or credit cards, but these are the only means in which they have to get a hold of credit.
This leads me back to how one can conceivably outsmart the system. Those with bad credit, but have developed new found financial responsibility, have one mission: improve their credit history. If all they have are these high interest avenues to do so, then they should use them. Am I suggesting those who managed to dig themselves up out of debt go and take out high interest loans from predatory lenders? Yes, I am.
So long as you are in fact financially responsible, there is no harm in taking such loans out if you plan on paying them back completely and quickly. You don’t have to use the money, just borrow it and pay it back. Doing so will improve your credit rating over time. The same is true of credit cards. The 16% APR for a new credit card in the wake of bad credit history might seem intimidating but if you just use it to top the gas tank off and pay it off every month, those loyal repayments will be recorded by the three major credit report agencies.
Could this be how folks are able to outsmart the high interest loan business and rise up out of bad credit ratings? We’ll see how well it catches on. In the meantime, seriously consider attempting one of these options. Being a responsible borrower is meaningless if you can’t prove that you can borrow responsibly. You got to start sometime, why not now?
Crystal’s Comments: I agree that being a responsible borrower will help avoid most problems.
Thank you for your information and response.
APR is a good high-level comparison, but for loans that are indeed short term it can be more useful to show other metrics. Don’t know exactly about title loans, but speaking about payday ;pams I can say, if someone only need a loan for just a couple days and borrows $200 and agrees to pay back $210 this would yield an APR of 912.5%.
Hearing such a rate you would think that the lender is unscrupulous and is making a killing. The truth is they made ten bucks – not even enough to cover overhead and salary for the 30 minutes it took to process the loan/repayment.