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Having a bad credit doesn’t necessarily stop you from getting a loan, but will make your options limited and may give you a hard time getting approved. A payday loan is one of that options that can allow you to get the funding that you need to make ends meet. But know what you’re getting yourself into before signing the contract as there’s no turning back after that.
Can I get a payday loan while having a bad credit?
In payday loans, your credit score isn’t much of a factor in you getting the loan or not. Like all or most short-term lenders, they are more concerned on the borrowers’ ability to repay. As long as you meet the lenders other requirements and has a good source of income bi-weekly, monthly, or annually – you’re good to go.
However, compared to other loans that require thorough check; you’re likely to face astronomical interest rates and tons of fees. Those fees alone can add to a couple hundred to your principal amount, add interest in that equation and you can easily get buried in more debt if you won’t be careful.
Pros of a bad credit payday loan.
Some lenders won’t require you to have a checking account. Although this can only apply for lenders who has physical offices. Almost all lenders will ask you to have a checking account as your funds would be deposited there.
Even while unemployed, you can still get a bad credit payday loan. Provided that you are still receiving an income or have somewhat of a stable cash flow.
You can receive your cash as quick as the next business day, and if you choose to get the cash yourself on their offices, then you can get it on the same day.
Cons of a bad credit payday loan.
Astronomical interest rates. With APRs reaching to 400% you are bound to pay more interest compared to any other loans. If you don’t manage it correctly, it will result in you getting more buried in debt. And because of having such high interest rates, payday loans are not legal in some states in the US.
Short repayment terms mean that the loan requires to be paid as soon as possible. Make sure you can afford what you’re taking out. Even missing a single payment will put you on a bad spot.
Shady lenders. Some lenders are out there to shark you out of your money, pressuring you to extend your payday loan if you’re having a hard time paying for it, or generally pressuring you in taking out a new one.
Other payday loan alternatives.
Installment loans – If you feel like you’re unable to immediately pay a loan, you can try a loan that has a much longer payment term.
Payday loan alternatives – Credit Unions are a good alternative if you need that immediate funding. They are a non-profit organization and will help anyone in the community that is in need.
Auto Loans – now this is a bit risky compared to others because you are offering your car as a collateral in any case that you fail to pay or default the loan.
The best payday loan that you can get while having a bad credit is where you don’t get buried in even more debt when taking out one. Naturally the interest rate would be high, but if you can look for a payday loan that offers the lowest interest rate out of others, then that’s a huge plus.
Comparing The Best Loans For You
Your credit score is created out of the details found on your credit reports. It is composed of your history on how you have managed to use credit in the past few years. Among the information your credit record contains include the credits you’ve taken and what type are they, how many credit lines you currently have that’s open, how well you have managed your bills, and if you have existing debts as of the moment among others.
Two of the most important things that could influence your credit score are the total amount you owe and your payment history. This is where you can determine the effect of a loan on your overall credit rating.
Loans and your amount owed
Perhaps the biggest effect that a loan has on your credit score is how it can raise your total amounts owed. This can have a short-term effect of lowering your score since you’re adding to your overall debt load while decreasing the amount of overall income you’re getting.
Loans and your credit history
If you have a rather thin credit history and you want to build it up, taking out a loan is always a great way of bulking things up. It would help even more if you could take out different types of loans as this could give lenders the impression that you know how to manage different types of credits making them likely to let you borrow in the future. Of course, this only works provided that you do properly manage the repayments of the loan.
Loan types and credit history
The types of loan you’ve taken can have an impact on your creditworthiness too. If you have a variety of long term loans on your history, this can have a positive impact on your score. But if you seem to have multiple payday loans or other short term loans, it might look to potential lenders that you’re financial in trouble. So, pay attention to the types of loans you’re taking out.