Matching Credit Products to Consumer Needs

We can get credit in a variety of places and in a variety of forms. In addition to credit cards, other credit products are available to us for specific uses. Review the list below to understand some of the normal forms of credit available.

Loans to Avoid

Above, we have reviewed some common types of loans available to consumers and noted how each might be used. There are other types of loans available to consumers that offer fast credit, and though they are legal, may not be in the consumer's best interest. These types of credit often charge very high interest and tend to offer their services to the consumer who cannot get credit elsewhere. Here is a short list of loans you don't want to take out and why.

Advance Fee Loan - This type of loan requires that you pay a fee before you are given a loan. The fee can be several hundred dollars. Many times the lender who makes this sort of loan will take the money and run. Other times they give you a very high-interest loan. Traditional lenders don't make advance-fee loans.

Finance Company Loans - Finance companies can charge much higher interest rates than other lenders. They are also notorious for having a lot of hidden fees. Some companies will encourage borrowers to borrow more than they can afford to repay.

Payday Loans - To get this loan, you write a check to the lender for the amount of money you wish to borrow plus a very high fee. You get the amount of the check (less the fees) and the lender does not cash the check. On payday, you repay the loan plus the fees and you get your check back. If you cannot repay the loan, the lender rolls it over to the next payday and charges you an even higher fee. The cost of the loan gets higher and higher making it more and more difficult to pay off.

Tax Refund Loan - Also known as a tax anticipation loan, this type of loan involves borrowing against a future tax refund. While that sounds appealing, the interest rates on the loans are very high, as are the fees and the tax filing expense. The length of time for the loan is only about ten days (the length of time it takes for your refund to come in.) Your refund will go to the lender who will take out their money before giving you any excess.

Car Title Loans - If you have a clear title to your car, some lenders are willing to give you small short-term loans, usually about 30 days. In return, you give them the car title and a set of keys (collateral). When you repay the money at a high-interest rate, the collateral is returned to you. However, if you fail to repay the money and miss a payment, you could lose your car.

Self Assessment

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