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The Worst Kinds of Loans & Why You Should Avoid Them

What the Average Consumer Should Avoid

When you are struggling to make ends meet, loans might sound like a good idea. However, there are certain types of loans that you should always do your best to avoid.

You should be aware that there are helpful, safe loans out there – but predatory loans exist as well. So exactly what loans should you avoid?

Criteria of Loans to Avoid

There are a few criteria for dangerous loans that you should stay away from. They include:

  • Overly high interest rates
  • Short repayment times
  • Complicated defaulting consequences

When you are looking into a loan and you notice any of the above criteria, be wary of going through with it. These are all tell-tale signs of predatory debt and any one of them could do you more harm than good. These types of loans are designed to keep you in debt, instead of expecting you to eventually pay it off.

The following are all the worst types of loans. They fall into the above criteria and are harmful to your financial well-being.

Payday Loans

This type of loan is the most predatory and dangerous to you. These loans tend to hide their interest rates under the term “fees”- which can go up to 500%! This is a ridiculously high interest rate, and if you ever encounter it, you should avoid it at all costs.

These loans are designed to be easy to obtain, but are seriously hard to get away from. They are made to keep you in a cycle of debt – you will need to constantly borrow just to make the last payment and keep accruing “fees” and a larger amount of debt.

They were created to keep struggling individuals within debt. You should never sign up for a Payday loan!

Installment Loans

These loans are just as bad as Payday loans. Installment loans will give you a smaller amount of money on short notice. However, they come with an extremely high interest rate. The main difference between them and Payday loans is that they are often due back 6 months to a year later.

Because of the insane interest rate you are expected to keep up with, you will end up paying back a large sum of money – if you can even afford it. Many Installment loan participants reported giving up thousands of dollars from their paychecks after being forced to default on their loan.

Sadly, the amount taken from their paychecks helped very little, as the interest rates were so high, the loan only continued to grow.

Private Student Loans

Many students can not attend college without a loan, due to how high the cost of tuition has become. Even though this is the case, you should do your best to avoid borrowing from private student loan companies.

Private student loans will not offer alternate repayment programs or loan modification – you can either make the payments or accept the negative consequences of defaulting. These private loans can also prevent you from paying off any higher loans you have first and are especially damaging if you need to default.

There are other options, such as financial aid or a federal loan, that you should consider before a private student loan. Your school’s finance department can help you find these options.

Car Title Loans

Car title loans are known to be terrible. If you agree to one, you would be expected to pay back a high interest rate, usually only a month later. This is impossible for many people and can lead to repossession of the car in question.

Cash Advance Loans

Some businesses today still only accept cash, however, you should do your best to avoid opting for a Cash Advance loan. First of all, you need a credit card to get this type of loan. You can then use it to withdraw cash from your bank.

Be aware that doing so comes with a very high interest rate. They typically have a lot of additional fees counted in as well.

In an emergency, this can be a decent option to get some hard cash on hand. However, never use this type of loan in your normal day to day life – the fees will add up, putting you in a massive amount of debt in a short amount of time.

Debt Relief is an Option

At some point in everyone’s life, we become desperate for much-needed funds. Without them, survival can become hard. In these situations, many people turn to getting a loan and end up more stressed down the road due to not being able to pay it back.

If this has happened to you, one way to relieve that financial burden is through seeking debt relief. When you are free of debt, you will find that your life becomes so much less stressful.

If you have become a victim of any of these terrible loans, it may be time for you to look into professional debt relief as you will receive professional advice and know what you can do with certain loans and how to pay them off once and for all. In life, it is sometimes inevitable to use loans and end up in debt but you can have some peace of mind knowing that there are solutions available to you.


Those were the worst kinds of loans that you can find. They are designed to have high interest rates, short repayment times, and complicated defaulting procedures. If you notice any of these aspects in a loan agreement – steer clear! They will only damage you financially.

Some, like the Payday loan, are extremely predatory. They use all of the aforementioned criteria to keep you locked into a loop – an endless cycle of taking out loans and watching your debt rise is all that awaits you with those types of loans.

In short, if you have found yourself struggling due to a large amount of debt, there can be a way out. Loan forgiveness is important and you should welcome it into your life, especially if these debts are causing you stress and ruining the quality of your life.


Peter Christopher

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