2. They don’t look good on your credit. Riskier loans will often show up on your credit and they definitely don’t look good. If you take out a car loan or a home loan, it isn’t going to raise a flag. Once you take out a loan for everything under the sun, it’s going to start causing you problems. Having obscene amounts of money on credit cards has a similar effect. There actually aren’t a lot of differences between these loans and credit cards except that credit cards have much better interest rates. If you’re paying interest rates on a loan that are higher than a credit card, you really need to re-evaluate your financial decisions.

3. The fees and terms are ridiculous. Late fees on high risk loans often make your interest rates spike. At the least, they will cost you a huge amount by way of fees. There are quite a few loans out there that cost $10 per every $100 borrowed, even though they have to be paid back within a month. If you don’t pay off the loan in full within one month, they will charge you another $10 per $100 owed. This will add up in a huge hurry if you don’t get in front of it immediately. Since people often understand nothing about compound interest, they don’t understand how quickly this can add up.

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