Payday Loans with Bad Credit – Applying and Common Alternatives

Payday Loans with Bad Credit – Applying and Common Alternatives
Lauren Howells
Bad credit payday loans

Applying for a loan with bad credit.

If you have a bad credit rating, what options do you have if you need to borrow money?

Bad credit payday loans may be suitable when other lenders have refused to provide the funds.

Most forms of credit will not be available to somebody with a poor credit rating. Traditional loans are unlikely to get offered. Your bank may not provide you with an overdraft.

There are some credit cards available for people with bad credit, but applying for these will take time and your application may not get accepted.

Some people with bad credit choose to avoid applying for a credit card, because they offer revolving credit with no repayment deadline. It is far easier to build ongoing and unlimited debt with a credit card.

How do you get payday loans with bad credit?

Lenders will only take on a certain amount of risk. With your bank, the limit may be quite low.

Providers of payday loans are willing to accept a higher level of risk. They account for the possibility that not all debts will get paid off. And mitigate that risk by charging higher levels of interest.

Payday loans are a high interest, short-term credit option.

Lot’s of people ask themselves what do i need to get a payday loan.

You can apply for a loan online. Most lenders will ask for personal details and for information about your income and expenditure. In a majority of cases, you will be able to go through the entire application process using your computer, tablet or smartphone.

Occasionally, extra evidence will get required by the lender.

Is it wise to take out a payday loan with bad credit?

Payday loans with bad credit

If you are struggling financially, it is not wise to take out a payday loan. These loans are only used for emergencies, and only when the borrower knows exactly how and when they will be paying the money back.

Borrowing money when you are already struggling could send you into a debt spiral, which would leave you unable to pay back what you owe.

Yet, a poor credit rating is not indicative of current financial difficulty. Some people have poor credit ratings whilst being in reasonable, or good, financial positions.

How your credit score works

Your credit rating is usually a solid indicator of past behaviour. If you have a poor credit rating, this may be because you have struggled with debt in the past.

You might have missed payments, or have sought debt advice and signed up to a DMP or IVA.

A credit score constantly changes, but most financial behaviour gets kept on record for many years.

This means that bad credit and current money problems do not always go hand in hand.

For example, did you know that a default can stay on your credit file for up to six years? Your debt management actions from more than half a decade ago could still be affecting your credit rating today.

You may be earning much more money now, or be better at controlling what you borrow. This is something that payday lenders often take into account. They check loan affordability when making their decision, rather than relying specifically on the contents of your credit file.

A lot can change in a few years. If you are now in a stronger financial position, but you find that your past is still affecting your ability to borrow, then a bad credit payday loan could be the most suitable option.

Payday loans for people with no credit rating

Building a credit rating is a challenge in itself.

Some people find that they cannot get a loan or overdraft, despite never having been in debt before.

The people in these cases may simply have no credit rating, rather than a poor credit rating.

It is difficult to borrow money unless you have proven that you are credit worthy. You cannot easily prove that you are credit worthy until you have borrowed money. People in this situation may get treated as though they have a bad credit rating, rather than a neutral one.

People in this situation may get treated as though they have a bad credit rating, rather than a neutral one.

If you have not built a credit rating that you can get judged by, traditional lenders may not want to offer their loans. In these cases, it may be worthwhile applying for a payday loan.

Payday loans for people with poor credit

In some cases, poor credit rating may even be deterring to payday lenders.

If you have a very bad credit rating, along with recent instances of missed payments on your credit file, then lenders may simply reject your application.

In these cases, a guarantor loan may be more suitable.

Guarantor loans

A guarantor loan is a short-term, high-interest loan that gets designed for people with bad credit. Unlike other bad credit payday loans, these are not dependent solely on the borrower.

To apply for a guarantor loan, you will need to find someone that you trust to back you up. This person should have a good credit rating of their own. If you miss repayments, your guarantor will get chased for the debt.

Payday loans with bad credit

Lenders are more willing to offer guarantor loans, because they can claim the money back from elsewhere. If you cannot meet your financial obligation, your guarantor will get expected to make repayments.

Acceptance levels are typically higher for this type of loan, but many people feel uncomfortable discussing debt with friends and family. It can be difficult to find a guarantor that is willing to take the risk, even if you are courageous enough to ask around.

It can be difficult to find a guarantor that is willing to take the risk, even if you are courageous enough to ask around.

Bad credit payday loans: 5 questions to ask yourself

Before borrowing money, ask yourself these five questions:

Do I really need to borrow the money?

Payday loans should only get used for the essentials. This is particularly true when you have a bad credit score already.

One of the benefits of a poor credit loan is that it is available to borrowers that cannot access funds elsewhere. This is also a drawback, because it can be tempting to apply for a loan simply because there is a chance that you will get accepted. When credit is hard to come by, borrowers might believe that they are taking advantage of the situation.

Payday loan applications are also processed relatively quickly. In some cases, a decision can get made within an hour.

If you apply for a loan, it could be in your account within hours. Whilst this can be a good thing, it also means that there is a risk of borrowing on impulse. The money could be in your account before you have had time to decide if you are making the best decision, so it is important to always take time to think before making your loan application.

What is my credit rating like?

By taking the time to understand your own credit rating, you can begin to predict how various lenders will treat you. Getting informed and educated will help you to make more responsible lending decisions.

There are now many free credit report providers. They will update your score, usually once a month so that you can access it online.

Remember that each credit score provider will have their own criteria list and score system. Your score from one provider will not necessarily match with your score from another, though you should see many similarities.

You can also use free access to look over your credit report details. Ensure that the information is accurate and up to date.

Does applying for a loan make my credit score worse?

An application leaves a footprint on your credit file. This footprint will fade over time. One footprint should not be an issue, but if many footprints get left within a short space of time then this may indicate that you are struggling financially. Multiple footprints may suggest that other lenders have rejected your applications.

Whenever you apply for a loan, a lender will look at your credit file and can see any footprints recorded. These might affect a lender’s decision, and can affect your credit score.

Before applying for a loan, think about whether your chance of success is realistic. If you apply for loans with little chance of having your application accepted, you risk damaging your credit file for no reason at all.

If one lender rejects your application, do not move on and send applications to half a dozen more out of a sense of panic or frustration. Stop and take stock of your situation, re-evaluating options before you continue.

Applying individually with each lender can be time-consuming, as well as having an impact on your credit score. You have the option to use a loan broker, like Cash Lady, submitting one application. Your application will get evaluated by a wide range of lenders at the same time, which can reduce the impact on your report.

Do I fit the criteria for bad credit payday loans?

Before applying for a loan, you should check the lender’s criteria. Each lender will have specific requirements, but as an absolute minimum will request that you are over 18 and a UK resident.

Lenders need you to have a minimum income. The income sources that are acceptable will vary from lender to lender, as will the minimum amounts.

Applying for a loan is not worthwhile if you do not even fit the lending criteria. Always ensure that you have read these before submitting your application form. This is especially important in the case of short term loans for bad credit.

Payday loans with bad credit

Is a payday loan the best choice?

Before applying, be absolutely sure that you are making the right decision. Compare payday loans with other products, such as guarantor loans and secured loans.

You may wish to visit a pawnbroker if you have any valuable belongings, or perhaps sell items you no longer need to cover your planned purchases.

Peer to peer loans are another alternative. With these, you borrow from another person rather than a major corporation. The lenders in this setting are typically individuals with savings, lending their money in return for a better interest rate than the one that their bank can offer.

Do not forget about credit unions. These are clubs with memberships typically based on a career type or residential location, where members pool their resources to offer low interest loans between themselves.

Payday loans without credit checks

If you have any concerns about your credit rating, the thought of a credit check getting carried out may be enough to cause significant stress.

Lenders have a responsibility to run stringent affordability checks before approving any loans. This is a legal requirement, making lenders particularly careful with their money.

Whilst this might sound like bad news, it means that a consumer’s interests get protected. Nobody should get provided with a loan, unless they can get expected to afford the required repayments.

Some lenders run automatic affordability checks that approve or reject with little consideration for your personal circumstances. Other lenders provide a more personalised service, taking a wider range of details into account. Lenders might want to know exactly how the money gets used, and where the repayments are getting sourced from.

Credit checks can seem like the enemy, in your quest to get a payday loan. In fact, they are there for your protection and are a very important part of the process. The system is not always perfect, but with a poor credit rating it is particularly important to think carefully about affordability.