It’s no fun to have bad credit. Sometimes it feels as though no matter what you do, things just get worse. Good people have bad credit. It can happen with a job loss, a medical emergency, or a car accident. It can also happen when good people lose control of their finances.

So what happens when good people with bad credit have an emergency need for money? Maybe a parent is ill, maybe the car needs repair, or maybe they need to see a doctor and don’t have any insurance or money. Whatever the need, whatever the emergency, good people with bad credit have limited options.

They need a personal unsecured loan and the need it now. In almost every neighborhood there is one lender who reaches out a helping hand. That lender is a payday loan company. Payday lenders offer small short-term loans with no credit check. The only catch is that the borrower must pay them back from their next paycheck. Usually the borrower pays between $15 to $30 interest for a $100 loan with a guaranteed repayment in two weeks. At first blush that doesn’t seem like so much, but actually annual percentage rates work out to 300% to 1500%.

The major drawback with payday loans, however, is their incredibly short term. Borrowers, who are already stretched thin, have difficulty repaying the loan in a two-week period. This leads to rolling over the loan, which in turn leads to more fees. Too often it becomes a vicious cycle. Fortunately, as word of these predatory lending practices has filtered into the media, other institutions have stepped up to offer short-term personal loans.

Credit unions were the first to step up, offering short-term loans to their members at far lower interest rates and extending them over longer periods of time. The typical short-term personal loan is written for 90 days, which gives the borrower adequate time to repay the loan. Payments are low enough that the borrower’s budget isn’t completely crushed. Other institutions, such as banks and savings and loans, are also starting to step up.

Even in emergency situations, individuals with bad credit do have options. Payday loans are one of them and sometimes they are necessary. But borrowers should look first to credit unions, banks, and savings and loans, to see if they qualify for a short-term loan with lower interest rates and a longer term of repayment.

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