Getting approved for a loan isn’t always a good thing. You have to make sure you are a good borrower. What makes a bad borrower? There are several types of loans you should avoid if you don’t want to overextend yourself and potentially damage your credit rating.
Payday loans Interest rates on pay day loans often run high into the triple digits. They are designed to be extremely short-term. Pay day loans often put borrowers in a cycle of debt that can be difficult to break because borrower usually can’t pay off the original loans and keep returning to the service.
Car title loans Borrowing against an asset is usually never a good idea. Most car title loans charge interest with an annual percentage rate of well over a 100 percent and they are generally due within one month. If the borrower can’t pay back the loan, the lender will take your car and sell it.
Tax refund anticipation loans Another loan with an extremely high interest rate is a tax refund anticipation loan. If you need more money you can change the amount that’s withheld from your paycheck. That way you give yourself a raise and the government takes only the amount that’s owed.
Co-signing a loan Co-signing a loan for someone else has you taking on all of the responsibility of another financial obligation with none of the benefits. Too often co-signers find themselves left with the loan long after the other person on the loan has stopped paying. It usually never makes sense to take on someone else’s debt.