A bad credit rating can restrict your borrowing options significantly. Most major lenders simply won’t entertain your application and if you are in need of cash quickly, this can be a highly stressful and worrying time. But there are options available, even to those with bad credit. However, as with all lending, it comes with a warning. You should only ever borrow what you can afford to pay back. If you off set one debt with an even bigger one (with or without a higher rate of interest), you will just be making the problem worse. If this is the case for you, then you would be advised to approach a finance expert.
However, if you have a bad credit rating from a few issues you’ve had in the past (remembering that all transgressions will remain on your report for around 5 years), but are now in control of your finances there are options available. One of the most popular is the payday loan. Payday loans have become a hugely popular contemporary borrowing solution. The often 2000%+ interest charges attract a lot of negative headlines, however this is often a little misleading. As we’ve already established, it can be difficult for people with bad credit to get any form of loan. Therefore if they are plunged into a situation where they’ve unexpectedly overspent that month, perhaps due to a car breakdown or an unusually high utility bill, there may be no way of getting finance other than to approach a payday loan company. The interest rates on the money borrowed are high. However, the APR used isn’t necessarily representative of what you’ll actually pay back. APR itself is used to measure interest rates, and therefore it isn't necessarily the best way of calculating lending on a monthly basis.
As you may already be aware, payday loans are simply a short-term lending option to tide borrowers over until their next payday - when the loan will need to be repaid . Therefore they are purposely created for periods of less than a month ordinarily. You'll often find that most lenders have a base interest or charge for each £100 you borrow - this might only equate to between 20 or 25% of the overall sum. For example, if I were to suddenly need a new boiler for the house and was short by £400, I could get a loan at a 25% rate of interest and simply repay the lender £500 when my next payday comes around.
Of course this rate of interest is considerably higher than you would pay on a bank loan; however, this is a far more accessible and quick way of getting finance. Many payday loan providers won’t run a credit check at all and those who do will often have far lower requirements than long-term lenders. Often the only thing you’ll need to prove is that you’re employed, that you have a bank account and that your salary will comfortably cover the proposed repayment.
You should make sure that you do your research first though. Bad credit payday loans might offer a quick solution, but you need to be wary about whether it will suit your current situation. Ideally you should be looking to work out how much the loan will cost you and evaluate whether you will be able to repay it as agreed in the terms. If you would find your self further in the financial mire as a consequence, this isn't the solution for you. If you're in a situation where you've had a sudden shortfall in cash and will be able to get the funds within the next month, then this short-term borrowing solution might be the one for you.
Payday loan companies must also abide by industry regulators, therefore you won’t find yourself being unduly pressured for an early repayment or have any surprise charges. Therefore this is a far safer way of borrowing than going to a shark or other unregulated loan provider. Avoid taking unnecessary risks, even if you do have a poor credit rating, there are always legitimate sources of finances available to you. Here are a few things to consider before applying for a payday loan:
- Ensure that you are able to fulfil the lender's criteria
- Seek professional advice if unsure
- Avoid unnecessary borrowing
- If rejected, don't be afraid to look elsewhere
- Research providers to see who offers the best rates