Debts are never good news as they can leave you in the monetary negative for life, bring down your standard of living, and even lead to health issues. However, we all end up falling for loans despite knowing that they can be avoided. While some do it to enjoy the luxuries of life, others do it to make ends meet. No matter what the case, it is very important that you know what you are getting into.
Although all debts are bad, there are some that are more dangerous than others. From an excessively high rate of interest to various enticing offers, that makes you spend more than you can afford. Since they can wreak havoc on your financial stability, there are some types of loans that you should avoid:
1. Payday loans
Payday loans are the foremost loans to avoid as they are very expensive. On the outside, they may appear as a resource that could help you during the last days of the month, before your payment is credited. They are aggressively advertised and placed as the most easily available loans for the people in need. However, in reality, payday loans can impose some really substantial and unnecessary interests that can put you under an enormous amount of debt that you cannot comfortably pay.
2. Car title loan
These loans can put your assets in jeopardy. When you go for a car title loan, you agree to repay the amount at a high rate of interest, which can go as high as 300%. The loan is usually due in 30 days. Before you get the loan, you agree to put your paid-for vehicle as security. Such loans pose a serious risk to your family assets, that too when the actual amount of the vehicle is much higher than the loan amount.
3. Credit card cash advance
One of the commonly taken loans, credit card cash advance loans have a very high rate of interest. These loans look more appealing since they are taken using the credit card, which is already issued to you. It does not require any new paperwork and can be received instantly. However, these loans come with a very high rate of interest and a steep charge. The average fee that needs to be paid for these loans is anywhere between $10 and $20 and the rate of interest can be anywhere between 1% and 7%. The cash should only be withdrawn from a credit card in situations where there are no other options available. Such loans should always be your last resort or avoided completely.
4. Casino loan
There are many casinos that offer loans that can only be used for gambling, and they should definitely be avoided. The money should only be taken from the casino when you have money in your account, but you do not wish to carry it. If you lose all the money while gambling and do not have enough to repay, the casino can put a loan on your home.