The unsecured loan industry exists, at least on the surface, to help people with extremely short term emergencies. By short term, we are often talking paying back in days or weeks, but seldom more than a year. If you have a problem that requires more extensive help, you need to work with a different kind of business.
But many find themselves in the situation of getting payday and other unsecured loans from multiple vendors. While this is easy to do, you will quickly find your monthly paychecks going to pay the interest on the loans, which you are continuously rolling back into just to stay afloat. You can easily find yourself paying more in interest each month than the money you get with just one of your loans.
Sooner or later you will run out of money, and the entire house of cards will fall. Once you default on your loans, all that fine print that you skimmed over begins to take effect. You will be held accountable for the money that you borrowed, and if you default, the lender can take legal action to get their money back.
There are other, less obvious issues with having multiple unsecured loans. If your loan application requires that you inform the lender of any other loans that you have outstanding, be honest. They will use the various credit reporting agencies to verify your information anyway. Falsifying financial information on a legal document can get you into legal trouble, both in civil and even criminal court. In some cases, you could be looking at a felony charge.
Make sure that the lender is on the up and up. If they are not concerned about your credit rating or who you have loans with right now, they might not be the kind of company that you want to deal with. Remember, the less they want to know about your credit rating, the more money you are likely to have to pay back in the end. Lending to people with poor credit is a high risk proposition. That risk is covered by higher interest rates.
Make sure that you can make your payments. Loan companies, even the good ones, still want their money back, and have a variety of legal means at their disposal to make sure that happen.
Get the lowest interest rate that you can. It not only lowers your monthly payments, it makes your total payback amount much less.
Check out your own credit score. You are allowed to get one free personal credit report from the three major agencies each year.
Make sure that you correct any errors or omissions that may be adversely affecting your credit report. A better credit score often translates into a better interest rate.
If your credit score is particularly low, you may be limited to payday loans, or other high interest, short term instruments. These are OK if you really have a pressing need, like forestalling a foreclosure. But be careful not to get overextended.
Avoid multiple unsecured loans. It could get you into legal trouble, but will most definitely put you on the hot seat financially.