5 ways you should never borrow money

    4:59 AM, Oct 2, 2012   |    comments
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    Borrowing money may seem like the answer when you need help, but it can be a risky business.

    Here are 5 ways you should never borrow money from Yahoo! Finance.

    1. Payday loans. Payday loans are small short-term loans backed by your paycheck. Most payday lenders don't consider your credit history, so people with bad credit can still get approved as long as they have a source of income.But these loans come with a catch - high interest rates and fees -- in fact, as high as 20-percent.

    2. Pawnshops. They lend you money by holding your items as collateral. Loans are typically 30 to 90 days, and rates and storage fees can be 10 to 20 percent per month. If you can't pay the loan when it's due, the shop can sell your collateral, which is generally worth a lot more than the loan amount.

    3. Cash advances from credit cards. You can borrow up to your credit limit and get the money instantly. Banks can charge up to 25-percent annual interest on cash advances, along with fees from 3 to 5 percent of the amount borrowed. In addition, unlike regular credit card purchases, you won't get a grace period. The interest clock starts ticking on day one.

    4. Buy-here-pay-here car dealerships. These dealerships often begin the sales process by looking not at cars, but your income and credit. Only when they learn what you can afford are you shown cars. Sign on the dotted line and you could be paying average annual interest rates of 24 percent -- that's three to four times the rate of typical used-car loans.30 percent of these cars are repossessed and resold.

    5. Title loans. These are small, short-term loans that are backed by your vehicle. Since you're putting up collateral, most lenders won't consider your credit history. It seems appealing until you realize you're handing over the title to your car for a loan that comes with extremely high interest rates -- as high as 125-percent in California.













































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