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Joyce Marter is a licensed psychotherapist with 25 years of experience and entrepreneur who founded and successfully sold Urban Balance, a national outpatient mental health company in the U.S. Marter is an adjunct professor at Northwestern University, international speaker, blogger for Psychology Today and mental health thought-leader specializing in the psychology of money.
It doesn’t matter if you have no credit or bad credit, you can still apply for a loan. You could still land some loans such as a smaller auto loan, though you might have to deal with a higher interest rate than those whose credit is better.
However, you aren’t only limited to that option if you are in urgent need of cash right now. Some lenders might offer you a short-term loan which doesn’t require a credit check at all. Such payday loans for bad credit are life savers if you’re in a tight spot. The question is; how do they work, and how can you be sure that they are what you need? That’s what this article is all about.
Payday loans are short-term loans that have less stringent requirements than other loan types. The loans are usually for smaller amounts of money, say between a few hundred to $1,000, and they’re due so fast. In essence, they’re called payday loans because you are to repay on your next payday.
Since these loans are comparatively smaller and short-term, they don’t impose the same struct terms of other types of loans. It’s so Interesting that you might not even require a credit check to get the loan. That explains why payday loans for bad credit or no credit can be a major source of relief to people in urgent need.
One other major advantage of a payday loan is that it’s usually unsecured. That implies you don’t need to present any collateral for the loan. A mortgage may require your home as collateral and you may collateralize your car for an auto loan, but you need zero collateral for this loan.
However, failing to repay your payday loan will negatively affect your credit. And you don’t want to cause yourself more damage, especially if you already have bad credit.
That being said, a payday loan can help you make up for a cash deficiency, but what’s most important is that you’re able to repay your loan within the appointed timeline. It’s only advisable to go for this type of loan if you’ve set up structures that can repay your complete loan amount.
It’s important to know your credit score if you’re looking for a loan. With a better credit score, you can access new loan options, even loans with lower interest rates.
But a bad credit score doesn’t automatically prevent you from getting a loan. Like we said earlier, options like payday loans for bad credit are available for you.
Now, what exactly is a bad credit? It’s all about the figures involved.
Your credit score is that three-digit number counting from 300 to 850. That’s to say, the greater your number, the better your credit.
Here’s a general credit classification:
Generally, you have a bad credit if your credit score is 579 or lower. Visit this government-approved site to check your credit score free of charge. If you find out you have bad credit after checking your credit score, you may want to know why. Below are some possible contributing factors:
Some public records such as tax lien or bankruptcy, will appear on your credit report, impacting it negatively.
Over one-third of your credit score depends on only your payment history. So it’s the single largest determining factor of your credit score.
Your payment history refers to a history of Prompt and missed payments. Making on-time payments on your loan payments, credit card bills, etc., will improve your credit score. But your score takes a loss every time you miss a payment.
Lenders will usually go through your credit utilization ratio to determine how good you really are at managing your funds. About one-third of your credit score also depends on your credit utilization.
The point is, it won’t favor you to be using a large portion of your available credit. Dining that will make financial institutions express concern that you’re spending above your means and using credit to cover up unnecessary expenses.
One should try to use below 30% of their available credit. In other words, if your credit card limit is $10,000, your balance in it shouldn’t be above $3,000.
Your credit score also gets cut short if you miss car or mortgage payments. But it will even drop more terribly if you keep missing your car and mortgage payments to the point where the bank forecloses on your house or your car gets repossessed.
Every time you default on a loan or consistently miss the payments on it, or if any of your other accounts enters into collections, your financial institution or provider reports your account to credit bureaus. This can cause serious damage to your credit score.
So, any one of those factors above can sully your credit score so it drops to a number considered as bad by lenders.
With that being said, payday loans for bad credit really exist. If you desire a short-term loan, look for payday loan lenders who won’t run credit checks on you before giving you a loan.
But be mindful never to take out a loan you’re not sure you can pay back. Missing any payments on your loan can dent your credit score. It will even be worse if you default on the loan.
You can access your loan online as many payday loan lenders provide online portals for that. Look for a lender you can trust after you’ve done your research and gone through their application process to get your desired loan.
You can apply online today if you desire to get a payday loan for bad credit individuals. You’ll often be required to provide some of your personal details. It takes just a few minutes to make many payday loan applications.
Summarily, you can readily apply for payday loans for bad credit, but it’s expedient to do your own research and to ensure you’ve set loan repayment plans in place. It also pays to take the necessary steps to beef up your credit score so that you can access more financial options in times to come.