Have you ever been in a dire financial emergency where you needed money fast? What are your options when your low credit score is preventing you from getting a loan?
For many, bad credit payday loans provide the temporary financial relief they need. How do these types of loans work? Keep reading to get the full scoop on payday loans.
How Credit Scores Impact Your Ability to Get a Loan
Credit scores are an estimated number that conveys your trustworthiness to lenders. These scores range from 300 to 850, and they often dictate your ability to get loans.
Lenders consider individuals with lower scores riskier. If you have a low score, then you’re likely going to have higher interest rates. Those who have the lowest scores may not get approved for a loan at all.
Bad credit scores often result in a vicious cycle. The consumer needs to borrow and repay to build their credit again, yet lenders won’t approve a loan.
Millions of Americans are looking for the best loans for bad credit holders. For many, payday loans are a viable solution.
Bad Credit Payday Loans: The Basics
When you have bad credit, you’ll need to build up your score to afford many loans. Making on-time credit card payments is helpful. But, you’ll need to find the best credit cards for bad credit.
Credit building takes time. There are situations, though, when you’ll need an emergency loan. That’s when payday loans become crucial.
Bad credit loans work like an advance on your paycheck. Once approved, your loan amount is either deposited into your account or you’ll get a check. Most often, you’ll need to pay back the full amount within 14 days.
Always verify the due date before agreeing to any loan.
In most cases, payday loans range from about $500 to $1,000. Most people utilizing these types of loans use the money to cover:
- Car payments
- Credit card payments
- Routine living expenses
- Mortgage payments
- Financial emergencies
These loans usually come with a finance charge. A finance charge will be a percentage of your loan amount. Again, always verify this charge before agreeing to a payday loan.
Getting a Loan with Bad Credit
In 2014, NBC reported there were more payday lenders than McDonald’s restaurants in the US. Why are so many people flocking to bad credit loans? Here are some of the benefits of payday loans:
- Loans are fast
- Payments improve your credit score
- There are many payday lenders to choose from
- Lower interest rates than most credit cards
These loans are meant to be only short-term. If you can’t pay back the full amount in time, then the charges can get extreme.
Should You Get a Payday Loan?
Experts estimate that about 10 million Americans seek out payday loans each year. These bad credit payday loans often get a bad rep, but they offer relief to those who need it most.
Have you ever utilized a payday loan? What was your experience like? Let us know by leaving a comment in the box below.