If you are someone with a low credit score (bad credit), you may be looking for the type of loans known as short term loans for bad credit, or a payday loan.
Bad credit short term loans are really unsecured personal loans, which are debts not backed by any collateral that you may possess. There are two types of debt, secured debt which requires collateral, so if you don’t pay the debt, the entity offering you the credit takes possession of your collateral.
Examples of this type of debt are:
1. A Secured Credit Card (which requires a deposit to open, the deposit is collateral)
2. A Car loan (the car is the collateral)
3. A Mortgage (the house is collateral)
4. Pawn Shop Loans (the object you pawn is collateral) The other type of debt is unsecured debt. This type of debt does not require collateral.
Examples of Unsecured debts are:
1. Credit Cards
2. Credit Overdraft Protection Plans
3. Payday loans
4. Lines of Credit with businesses, stores, or Financial Institutions
Should you not pay the debt, the business, store, or financial institution does not repossess any collateral you own. They may, however, report it to a collection agency, report it to a credit reporting agency, or take you to court and sue you to make you pay.
A lot of businesses, stores, and financial institutions know that going to court is a scary thing. They are hoping that presenting this action against you will frighten you into paying the debt. If you still don’t pay, and the debt goes to court, you should attend.
If you do not attend the court date, then you forfeit all of your rights to have a say about the debt before a judge (having a say before the judge gives you an opportunity to dispute the debt if you have some kind of proof that it is not valid or that you do not legitimately owe the money – an example of this is Identity Theft, your proof would be whatever documentation you have-i.e. a police report or financial statement-showing that you did not purchase the item.)
If an unsecured debt is forwarded to a collection agency, that collection agency will try to collect the debt by contacting you and demanding payment. By law, you have certain rights with regards to how a collection agency may contact you (when and where) and how that company and its representatives can treat you (what they can say and can’t say, and how they treat you over the phone). You do have the right to tell the collection agency to stop contacting you (its best to do it in writing). If you tell them to stop contacting you, this does not mean you don’t have to pay the debt!