Bad credit payday loans allow consumers to obtain a small amount of loan to meet their financial obligations. These loans serve as the perfect savior for cash stripped individuals who don’t have any other means of financing options. The loans obtained through payday loans allow individuals to get the much needed cash boost to pay for electricity bills, groceries, and other expenses that occur out of the blue.
The fact is that it is very easy to obtain bad credit payday loan. All you need to provide is a bank account number, proof of your employment, and contact details to become eligible for the loan. The best thing about this type of payday loan is that you do not need to have a high credit score or offer collateral as a security to obtain the loan. That being said payday loan is not the best option for everyone. You must never commit to payday loan before you get your facts straight regarding these loan options.
Fact #1: Payday Loan Entails High Interest Rates
The foremost thing you must note about payday loan is that although they are easy to obtain, the interest rates on these loans are a lot higher as compared to personal loans. In some cases, the annual percentage rate (APR) on bad credit payday loan can go as high as 574%. That’s why it is important that you pay back the loan amount on time to avoid taking on too much debt burden.
Fact #2: Payday Loan is a Short Term Loan
As the name itself suggests, payday loans are short term loans. The average loan term of payday loan is two weeks. The longer you take to repay the loan, the more difficulty you will face in repaying the loan amount. Tough you should note that the FCA legislations regarding payday loans means that you won’t have to pay more than double of your original loan amount.
Fact #3: Failure to Repay Payday Loan Lower Credit Score
Finally, you must realize that failure to repay the payday loan hurts the credit score. A number people apply bad credit payday loans without even thinking if they can even afford to repay the loan. They wrongly presume that defaulting on payday loans won’t hurt their credit score on the logic that they are different than personal loans.
Indeed payday loans are different than personal loans, but they are still considered a financial obligation; and unable to fulfill the financial obligation will reflect badly on your credit score. Also note that in some cases repayment of the loan involves a check. In case the check bounces when it is presented by the lender to the bank, it will not only affect the credit score but also lead to bounced check fees that will further increase the cost of the bad credit payday loans.
On a final note, you must know all the facts before applying for a payday loan. Knowledge is power. You must never apply for payday loan without in depth knowledge about payday loans.
Disclaimer Notice: The article/blog is intended for informational purpose only. You should not make any financial decision based solely on the information provided herein, and without consulting with a financial expert first.