Having problems on your credit
rating can wipe out access to borrowing money from a huge range of lenders.
Most companies that lend larger amounts of money need to be sure that the
people they lend it to are likely to pay it back, often over a considerable
period of time. This is why your credit rating matters and your overall credit
needs to be pretty good. However, if you only require a smaller amount of money,
and you can pay it back relatively quickly, there are certainly loans that you
can access, no matter how bad your credit is.
The main type of loan where your
credit report is often of little interest is a payday loan. These are always
for small amounts of money and always for a very short period of time. The
loans are usually just until your next payday, hence the name. The reason that
bad credit does not stop you getting one of these loans is that the loan is for
a very short period of time, so the lender is only really interested in knowing
that you will have enough money going into your bank account at the end of the
loan period to cover what you have borrowed.
For this reason, the main criteria
for being accepted for a payday loan are that you have a job and a bank
account. While some companies still want to do a credit check, there are plenty
who either will not check your rating, or who will be very flexible about any
problems with your rating. Payday loan companies often used to require you to
fax through various proofs of employment, etc, but with certain online
companies you can now go through an extremely fast, entirely online application
process, and have the money in your account the same day as you apply.
Payday loan companies will often
require that you have a debit card or that you set up a direct debit with them
to pay back the money borrowed. If you do take out one of these short term cash
advance loans, it is very important to pay the full amount back exactly on
time. The fees charged are reasonable when you look at them as a flat fee for a
service, but when you compare them in terms of annual percentage rate with
other types of borrowing, the interest rates are extremely high. So if you
didn't pay the loan back on time and continued that debt for a longer period,
the interest charges would soon mount up. Some people who have failed to repay
a payday loan have ended up owing much more in interest than the amount they
borrowed in the first place.
It is therefore important to
understand what payday loans are and when you should use them. They are not
designed to tackle ongoing debt problems, and if they are used in this way, it
is almost inevitable that you will end up with bigger problems. They are for
dealing with one-off, unforeseen bills or expenses, and tiding you over until
your next payday. If you need to borrow money for longer, or require it to pay
off other existing debts, then payday loans are not the answer.
