What exactly does a ‘bad credit payday loan’ mean? Does it mean that the lender will give money to just about anybody who comes to them? Well, not likely. After all, a lender also looks after its money, whether the borrower will be able to pay it back or not.
There is good credit, then there is bad credit. Bad credit rating means that a person has not be able to manage their finances properly, whether because of late repayments on loans and mortgages, defaulting, no income, or just bad financial judgment on their part. These people are eligible for payday loans but there are certain terms and conditions associated with payday loans that are provided to people who have bad credit.
Banks award more flexible payday loans to those people who have a steady source of income. This does not require a good credit history, but having one always makes your case strong. The bank just wants to make sure that they get their money back in time and that you do not fall under any debt.
A payday loan is usually given to those people who have short term financial instability and are not able to keep up with their expenses or emergency bills. The reason these loans are given on bad credits is because they aim at improving a person’s financial position for a short period of time. A payday loan amount ranges from £500 to £1,500, which is low enough that a person can pay it back under six months. People normally use payday loans to pay rent and utility bills, and to pay medical bills.
The criteria to qualify for a payday loan are different from lender to lender. While bad credit history is not a problem, lenders require the person to have a steady job or any other kind of income, which ensures that the loan will be paid back in good time. Though, a payday loan has high interest rates than any other kind of loans, the instant cash more than makes up for it.
Often people with bad credit apply for payday loans because either they want to pay their house bills or want to buy groceries and other commodities that are treated as ‘needs’ i.e. essential for survival.
Some lenders do not give payday loans to those people who either have a previous standing loan or debt, or do not have a good repayment history.
The reason why lenders are so keen to give people payday loans on bad credit history is because they charge high interest rates for it. With the borrower’s repayment plan confirmed, the lenders believe that with time they will be able to cover the amount.
The benefit that you get from a payday loan is that you can either clear your impending debts or pay your rent and bills. When your pay check arrives, you can repay your payday loan and boost your bad credit history. All you have to do is use the money strategically so that you do not turn your credit history for the worse.