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When in need of a short-term loan while having bad credit, and history – then your options are going to be pretty scarce.
When debating with yourself on whether to get a short-term loan or not, ask yourself. Am I able to repay it, and if yes, would it be on time? Often times, a loan which doesn’t require much credit is accompanied by a pretty high interest rate.
What is a bad credit payday loan?
Just like a normal payday loan, it’s a short-term loaned aimed to provide assistance to borrowers who has any unforeseen financial emergencies.
Keep in mind whenever taking a bad credit payday loan, or any loan for that matter. Make sure to borrow within your means. Borrow only what you need, and be sure to never miss a payment.
What’s a bad credit?
Bad credit is a term used on someone who has a history of mismanaging their debts, and finances. When you always miss paying any of your credit obligations such as your credit cards, utility bills, and loans, then you’ll likely have a bad credit.
Having a bad credit is the main culprit on why borrowers have a bad time getting financial help. Which is reasonable on the lenders end as having a bad credit usually means you are a liability and is riskier compared to borrowers who have a decent credit score.
Advantages of a bad credit payday loan.
A bad credit loan may be your only option when you have an abysmal credit score, and can be the difference between having a place to sleep in or not.
The application process is straightforward.
Being an unsecured loan, your assets are at no risk.
Short-term loans and payday loans are generally for a small amount only, which keeps your borrowing at a minimum.
Disadvantages of a payday loan.
A payday loan comes with very high APR.
It requires to be paid immediately as soon as you receive your paycheck, hence the “PayDay” name of it.
Will applying for a bad credit payday loan affect my credit?
If lenders do hard inquiries on your credit, then it’ll leave a mark there, but that’s it. But having a bad credit score, added with multiple credit inquiries in a short time will affect you and your credit score. That usually tells the lenders that you are unable to manage your finances and debt properly.
Whether you get approved or declined, a hard inquiry will leave a mark on your credit history. It’s advised to wait a minimum of 15 days before applying to a different lender to minimize further damage.
A bad credit payday loan can be particularly useful when you have a very bad credit score and don’t have access to the more traditional loans. But it’s only meant to be a temporary solution, don’t rely on a payday loan whenever you are in a tight financial spot, it will only create more problems in the long run.
There is no such thing as “the best payday loan” different lenders will offer you different terms and rates. Do your research, compare lenders and their rates before committing to one.
When you hear an advert about a payday loan. It sounds like it’s a fast way to get you money with no hassle. Only show your paystub, a valid ID, and present them a blank check and you’re all set. But what they don’t tell you is that – the $500 that you borrowed? It’ll take you months to repay, and in extremes – can take up to a year with thousands of dollars in interest.
How a payday loan works.
Let’s assume that you are in a tight spot and in need of a quick injection of cash until your next paycheck. You write the lender a check with the principal amount that you borrowed plus the interest rate. It can either be percentage based or a fixed amount depending on how much you took out.
And when the due date comes, you the lender will then cash the check out. And if you’re unable to pay, most lenders would give you the option of extending the loan, but not without consequences. They will charge you a “roll-over” fee.
How much is a payday loan.
The Truth in Lending Act requires lenders to disclose the overall cost of the loan in the paperwork before you agree and sign to their terms. They must be transparent at all times.
A lender might charge you $17.50 on a $100 loan. That’s how absurdly it cost. Over 640% in APR. A credit card interest rate may seem miniscule if you compare it to a payday loan. That’s how expensive it is.
A report from the Center for Responsible Lending said that most borrowers end up $793 in interest on a $325 loan. Although that amount didn’t reach by just interest alone – the main culprit is the fees that comes with the roll overs. It may be small at first, but the more you fail to pay your loans, the more you ask for an extension and the more that fees will pile up.
Alternatives to payday loans.
You can consider this options before taking out a payday loan.
A small loan from your credit-union.
Credit Card cash advance.
Ask a family or friend for a small loan.
Payday loans can be good if used and managed right. But the positives don’t outweigh the negatives here. One small slip-up can cause you to spiral into a payday loan debt. The rates and terms for a payday loan is almost predatory.
It’s best to explore other options first, and if you really can’t find one and is desperate for some cash, then you can turn to a payday loan.