“Quick and easy money” is a phrase that appeals to all of us, but these types of offers are often too good to be true. Most people who end up in these types of traps often fail to consider what has lead them to the point of needing such fast cash to begin with. Whether it is overspending or an unavoidable life circumstance, using quick money offers to manage your debts is generally a bad idea.
Payday loan companies are on every corner, enticing those suffering under debt burdens. Offering short term loans when cash is needed, payday loan companies often hide their unfavorable terms and conditions in the fine print. It isn’t uncommon for them to require post-dated checks to ensure repayment and carry interest rates upwards of 30-50% on the loan. More often than not, people get trapped and can’t afford to repay the loan according to the terms. What is worse is that these types of loans are rarely eligible for debt negotiation, as these lenders are ruthless in their collection efforts.
Cash Out Refinancing
Homeowners are often drawn in by the idea of refinancing their existing mortgage into a cash out loan. This creates a new, larger loan that covers both the mortgage and provides additional money that can be pocketed by the homeowner. While this isn’t inherently bad, using the cash for the wrong reasons is a quick trip to disaster. The point of refinancing is lower monthly payments and, chances are, taking out the new, bigger loan simply increases debt. Further, defaulting on the new loan can be even more detrimental than the original mortgage loan opening the homeowner up to foreclosure and increased credit damage as the result of greater debt liabilities.