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If you have poor credit history and need a loan, then your options may be limited. However, you can get a payday loan with bad credit. Unlike with regular loans, the requirements for these loans are based on your income and not your credit history.
This article will show you how to get a payday loan with bad credit. But first, what is bad credit?
Bad credit describes a person with a poor financial history. It’s a powerful number that can be used to assess a person’s borrowing power. Individuals who have high credit scores may find it easier to access loans and other financial services.
Typically, your credit score can go bad due to missed repayments, bankruptcy, or unfavorable county court judgments. Poor credit score can also be a result of not having any borrowing history.
Bad credit loans are also known as a cash advance. These are loans where the lender considers the borrower’s affordability of the loan and personal circumstance in place of the regular credit check.
The loan is typically designed for employees and people with a verifiable income source. The amount you get depends on the lenders’ assessment and your income to debt ratio. If you have other loans or mortgage liabilities, then you will get a lesser amount.
A bad credit payday loan usually comes with high-interest rates. Lenders may also charge hefty late fees if you fail to pay back your loan on time.
To be eligible for a payday loan for bad credit, you have to be a resident of the United Kingdom and must be over 18 years old when applying.
Applicants are also expected to be earning income from a paying job or business.
Here’s how to get a payday loan with bad credit.
1. Apply. Head over to the website or office of the payday loan direct lender and fill up the application. Provide all necessary information accurately - these may include your personal details, financial details, loan term, amount, and purpose.
2. Wait. You may have to wait for a few minutes to days, while the lender verifies your details.
3. Get your money to your bank account. Once confirmed and approved, you will be contacted and sent the loan amount.
You can apply through a loan broker or use a direct lender. Loan brokers search through their database for lenders likely to accept you, meaning only one credit check footprint. This is an advantage in case your application is rejected by multiple direct lenders, since it won't affect your credit score as much.
Bad credit payday loans usually come with higher interest rates. You should get quotes from various lenders and choose one with lower rates.
Payday loans are short terms loans. Some lenders offer a five day repayment period. It’s essential only to borrow what you can afford to pay back.
As mentioned earlier, bad credit loans typically cost more than regular loans.
Lenders usually check your credit score; however, they don’t use it as a consideration for assessing your loan application.
Choosing a lengthy loan repayment term will mean spending more in interest rates.
You may be charged penalties if you fail to make repayments as scheduled. You should always contact the lender anytime you will make a late payment.
Most lenders may also charge fees if you decide to repay your loan, earlier than scheduled.
Yes, it will. Typically, excess credit checks lower your credit score. When you apply for a loan (bad credit payday loans included), the lender usually checks your credit score. And in doing so, it leaves a footprint on your credit profile.
When multiple checks are made in quick succession, it leaves multiple footprints that indicate to lenders that you are unable to manage your finance properly.
To avoid such situations, it’s advisable to always wait at least 14 days between loan applications.
It depends. Bad credit loans don’t usually require a guarantor. With a regular loan, the lender is more concerned about your credit history. When you apply for a bad credit loan, they look at your income and debt ratio.
However, if both your income and credit history are unsatisfactory, a lender might ask for a guarantor since a payday loan is unsecured. The guarantor will be required to have a high credit score and sufficient assets to cover the loan.
If you can’t get a guarantor, you can opt for a secured credit loan instead. A secured loan requires having collateral, usually a property.
Typically you wouldn’t be able to access loan facilities if your credit score is below a specific range set by various lenders. But since lenders consider income instead of credit history for payday loans for bad credit, your score will have minimal effect.
The loans, however, come at higher interest rates, and you may be required to present collateral or provide a guarantor.
Your application may, however, be declined if the lender feels you cannot afford to pay back the loan.