Bad Credit Payday Loans and Should You Opt For Them

It can be said that payday loans are ruling the lending industry in UK nowadays. These loans have been a target of loads of criticism and attempts have been made to stop the payday lending industry from growing. But nevertheless, payday loans have managed to garner special attention with the borrowers.

In this article, we will discuss the features of payday loans and whether people with bad credit record should take out these loans or not.

But first, let us take a look at the major features of payday loans.

Overview of bad credit payday loans

Payday loans are short term loans and are given to the borrowers at very high interest rates. The interest rate is around 0.8% per day and you need to pay the loan back with the accountable interest on your next payday or within 21, 34 or 40 days, whichever is specified by your lender. Payday loans are approved very quickly and the cash reaches your account within a few hours, maximum within the day. Payday loans are offered to people with bad credit record too, hence they are commonly known as bad credit payday loans among the borrowers.

What are the requirements for taking out a bad credit payday loan?

The following requirements must be met in order to successfully get a payday loan approved-

·         You must be a resident of UK.

·         You must have completed at least 18 years of age.

·         You must have a steady job history of at least 6 months and should have a steady income.

·         You must possess a bank account and a debit card.

What details will the payday lender ask for?

You need to fill up an application form in order to apply for a payday loan. Normal details like your date of birth, residence address, employment details, personal details, loan amount, etc. will be asked in the form.

Once the form is approved, you will need to provide the necessary documents that the lender asks for. Normally, you will have to provide an ID proof, employment and income proof, residence proof, bank account and debit card details, and other small details which the lender might ask.

Note: Your information will remain safe and confidential, as payday lenders are bound by law to keep the details of their customer secret. You can take legal action against the lender if your information is leaked by them.

How much loan can I apply for?

Generally, payday loans range from as low as $50 to $1000. But the loan amount that you can take varies from lender to lender and your relationship with the borrower.

For example, you will not be able to take out a loan of more than $350 with some lenders if you’re their first-time customer. Likewise, if you happen to be a regular customer and have always repaid your previous payday loans on time, you might also be eligible for a payday loan of $1000, whereas normally the loan amount does not exceed $750 in case of normal customers. But then again, these terms vary according to the lender.

THE BIG QUESTION: Should I apply for a payday loan if I have a bad credit record?

Bad credit payday loans can save you from a big financial crisis or an emergency, but if not used sensibly, these loans can also create a financial crisis for you.

Payday loans are short term loans and thus have a high interest rate. The reason is simple- payday lenders need to make money out of their lending business and an amount borrowed for short term will not yield profits on low interest rates. Thus payday loans come with huge interest rates which not everyone can afford.

Before you apply for a bad credit payday loan, you need to check whether you can afford it or not. First of all, calculate your total monthly income as well as the monthly expenses. This will help you understand your financial position better and you will get to know if you can repay the loan on time or not.

Secondly, you should apply for a payday loan only if it is an emergency and you are not able to arrange finances from somewhere else. It is sensible to borrow a loan for medical emergencies or major house repairs, but you should never depend on payday loans to fulfil daily expenses and luxuries. Doing so will lead to a repeat borrowing habit which will harm you in the long run. Make sure that the emergency is important enough. Also, try to arrange the money from family and friends first, as it is better than repaying a loan with interest and in a very short time. When you borrow money from a close friend or family member, you don’t need to repay it with interest and you can pay it back when convenient, which is not the case with payday loans.

If you have a bad credit history, it means that you had trouble repaying the previous loans that you had taken out. If that is the case, then you must be very careful when borrowing payday loans. The main reason why payday loans are so popular is their easy availability to all; payday loans are available to those borrowers too who have a bad credit record. This also has been a main reason why payday loans are so heavily criticized.

So logically, if your credit record is poor, this means that you are not financially stable and it would be a risk to borrow a loan, that too a payday loan which comes with high interest rates and short repayment period. It is likely that a person who has defaulted on previous loans will not be able to repay a payday loan on time. This can result into paying more fees and more interest, thus paying back more than what you should have paid on time.

So before borrowing a bad credit payday loan, make sure that you really need it and that you can repay it on time. Remember, a wise borrower always remains financially stable.