Financial Problems and Loans From Finance Offices

Taking a personal loan can be an option while you're waiting for disability benefits.

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If you are disabled and unable to work, and you're waiting for a disability decision from Social Security, you may be running out of money and looking for a personal loan. Some people associate finance offices, also known as consumer loan offices, with images of burly loan sharks visiting borrowers in the dead of night when their loan payments have gotten behind. Perhaps in decades past, but today, that's certainly not the case. In fact, some of the larger nationwide consumer loan companies are owned by banks and insurance corporations with very recognizable names. A good example is Norwest Financial, a multi-billion dollar company that became a subsidiary of Wells Fargo. 

How is the typical finance office different from a bank? There are several distinctions.

  • Personal loans from finance companies can be obtained quickly. In fact, the more efficient loan companies can take your information over the phone and call you back with an answer in ten to thirty minutes. (It only takes a few minutes to pull a credit report, analyze it, and determine if a potential customer meets the minimum credit requirements and has a satisfactory debt ratio.)
  • Consumer loan companies will often make loans to customers who are unable to get personal loans from traditional lending institutions. However, this doesn't mean that a customer with bad credit can automatically get approved for a loan with a finance company. It simply means that most loan offices are more "lenient" when it comes to evaluating an individual's prior history of installment and revolving debt payments. In other words, one or several accounts that are "mildly past due" may not necessarily stand in the way of being approved. 
  • Loans from consumer finance companies tend to have higher rates of interest. However, very often these rates are not "set in stone." In certain instances, a customer can ask for, and get, a lower rate of interest on a personal loan. Also, loans from such lending institutions tend to be of the simple interest variety. The advantage to simple interest loans is the fact that the borrower pays interest only in accordance with the length of time the loan is kept open. This is quite different from loans where the interest is precomputed. With a simple interest loan, the amount of interest paid can be kept fairly small if the loan is paid back sooner rather than later and, typically, there is no penalty for early repayment. In other words, the higher interest rate might appear shocking, but the customer actually has a strong degree of control over how much interest is actually paid. Loans from finances are often thought of as second-tier options, but for individuals who need emergency money fast, have had a few bumps in their credit record, and think they may be in a position to pay off their debt early, personal loans from such institutions can sometimes make a good deal of sense. 

However, there are a few other ways to tide yourself over until you get your disability benefits. Learn about the financial assistance available while waiting for disability.

By: Tim Moore, former Social Security disability claims and examiner

Updated by: , J.D.

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