THE BIG QUESTION: Should I Opt For A Payday Loan If I Have A Bad Credit Record?

 

Payday loans can be OK if you have bad credit

If there was a question who is dominating the sub prime short term lending industry in the UK nowadays, the answer would surely be payday loans. Despite they are being criticised and it has been attempted numerous times to stop the payday lending industry from expanding, these loans still play an important role with the borrowers.

Before discussing characteristics of payday loans and whether taking out them is a good move for people with bad credit, let’s make a short insight into the payday loans.

 

Bad credit payday loans – overview

Borrowers get the short term payday loan at very high interest rates of up to 0.8% per day. For a single installment payday loan they are requested to pay the loan back on their next payday or within 21, 34 or maybe 40 days (whichever the lender specifies) with interest included. They are usually approved very quickly, so the cash could be deposited into your account in just a few hours, but usually not more than a day from being approved. They are sometimes called bad credit payday loans in UK as they are offered to people with bad credit too, which is exactly why they get a special attention from the borrowers.

You have to meet some requirement in order to get a payday loan successfully approved.

-        You must be a UK resident;

-        You must be at least 18 years old;

-        You must have a steady income and a steady job history for at least 6 months;

-        You must possess an account with the bank, along with a debit card;

-        MOST IMPORTANTLY THE LOAN MUST BE AFFORDABLE TO YOU

What details will the lender ask from you?

You will need to fill out an application form with which you apply for a payday loan. In the form the payday lender will ask your normal details, such as birth date, your residence address, personal details, employment details, loan amount and so on. When your form gets approved, you may need to provide the documents that the lender asks from you. Normally, the documents that are necessary are your ID proof, residence proof, employment proof, income proof, your bank account and debit card details. Of course, there might be other small details the lender might ask from you to provide. And you should note that the information will be safe and confidential, as the law bounds payday lenders to keep customer details a secret. If your information is leak, you can take legal action against the lender.

What is the range of payday loans?

Generally speaking, it’s usually from £50 to £1000, with many lenders capping this much lower for first time borrowers. However the loan amount can vary from lender to lender and having a good relationship with your lender might get you a bigger loan from the lender.

For example, if you are first-time customer with some lender, you may not be able to get a loan bigger than £300. On the other hand, if you are already a repeat customer and have always repaid previous payday loans on schedule, the lender may grant you a£500 or £1000 loan. You should have in mind that all these terms may vary according to the lender in question.

I have a bad credit record. Should I apply for a payday loan?

Ah, the big question.

Bad credit payday loans in UK must be used sensibly, otherwise they could create a financial chaos for you. On the other hand, they can also save you in case of an emergency or even save you from getting in financial crisis.

Due to the fact short term loans are more risky for the lender they have a high interest rate. The reason why the lender keeps them so high is obvious, with the risk of non payment being greater in this type of product it’s the only way not to make a loss. It is not uncommon to the way car insurance companies work, if they have a higher risk customer (such as a newly qualified driver) then they will charge more to allow for the fact there is a higher probability they will make a claim. So, bear in mind that the interest rates are huge and not everybody can afford them.

This is the first thing to check before applying for a bad credit payday loan. What you can do is calculating your monthly income and monthly expenses, as with this data you can better understand the financial position you are in. With this information, you will know if you can return the loan on time.

Next, it is advisable to apply for a payday loan only if you can’t arrange your finances from somewhere else and there is an emergency. If you need to have a big house repair or need the money for a medical emergency, it is feasible to apply for a loan, but don’t get a payday loan if you intend to spend it on daily expenses and luxuries. This can harm you in the long run, since you might develop a borrowing habit.

Be sure to check your emergency is really important. Maybe borrowing money from parents or friends is not a bad idea in this case, since the Interest in that case would be none or low compared to huge interest rates with the lender. Also, you can probably pay that debt when it’s convenient and with the payday loans, you have to honour a deadline.

Finally, while your credit history IS important to the lenders, affordability is equally, if not more important. Many lenders will ignore the loan you failed to repay 3 years ago if a) you have repaid other loans since and b) you can demonstrate that you can afford this loan.  Anyone can apply for a payday loan but not everyone will get one. Even if a lender says that they will consider those with bad credit history they will want to see both the willingness and ability to repay this one - stating that they consider bad credit is not the same as guaranteeing they will lend to those with bad credit.

Before you decide to borrow a bad credit payday loan in UK, make sure that you really need it, but also make sure you can repay it on time. 

Warning: Late repayment can cause you serious money problems

For help, go to moneyadviceservice.org.uk

Representative Example: Representative 1286.98% APR on a loan of £300.00 with 5 monthly repayments of £101.03 Total amount repayable £505.13 Annual interest rate (fixed) 290%

This article contains information about products/services offered by us as well as those that we do not offer.

Author: Internal Marketing Department

Representative Example: Representative 1286.98% APR on a loan of £300.00 with 5 monthly repayments of £101.03 Total amount repayable £505.13 Annual interest rate (fixed) 290%

 

This article contains information about products/services offered by us as well as those that we do not offer.

 

 

Author: External 3rd Party

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