Get Payday Loans With Bad Credit

Individuals with bad credit records are often the ones most in need of additional money. It can be hard, however, to find a lender willing to loan you money when you have bad credit. Payday loans are one option for borrowers who need quick cash while rebuilding their credit, but they are not always an appropriate solution to a money problem. In many cases, payday loans can spiral and you can get trapped in a cycle of debt that it is hard to get out of. Borrowers must approach such a loan very carefully and with full knowledge of the terms of the loan.

Steps

Determining if a Payday Loan is the Right Option

  1. Evaluate your options. Before you decide to accept a payday loan, seriously consider the other possibilities.[1] People with bad credit will have a hard time finding a favorable rate of interest, but payday lenders balance this risk by charging exceptionally high interest. Other options to raise cash include selling possessions, finding additional income sources, and taking out a traditional loan. If you need a relatively small amount of money to pay off a bill, consider asking friends and family if you can borrow from them, rather than turning to a payday loan.
    • Treat a loan from a friend or family member just as seriously as you would a loan from a financial institution, and fully document it.[2]
    • You should also contact your local credit union. Banks rarely lend small amounts, or to people with bad credit, but credit unions are often more sympathetic, and provide loans at much lower rates than payday lenders.[3]
    • Don't take out a payday loan unless you have absolutely no other option and are sure that you can pay the loan back on time.
  2. Learn the basic process of a payday loan. A payday loan is generally a small loan (usually $300 to $1000) that you pay off at your next payday, which is normally two weeks or a month after you take out the loan. To get the loan, you fill out an application and give the company a check for the amount of the loan, plus the fee that they charge. On the assigned payment day, the company will cash your check and your loan will be paid off.
    • For example, if you need a loan for $400, a company may charge you $100 in fees.
    • Therefore, you would write the company a check for $500 that they would not cash until the payment for your loan is due.[3]
    • Problems can easily arise when a large portion of your paycheck is going straight to the payday lender, prompting you to take out another loan to cover you until the next payday.
  3. Recognise the problems that can arise. There are many problems that can arise if you find yourself turning to payday lenders to cover your bills. As the loans are short-term and relatively quick and easy to get hold of, people often end up taking out small loans regularly, in part to cover the costs of the previous loan. This cycle of debt can trap people into high cost loans and increasing indebtedness.[4]
    • You can get free debt and money advice to help you plan your finances and avoid this situation.
    • If you find yourself rolling over your debt, the costs will increase very quickly.[5]

Applying for a Payday Loan with Bad Credit

  1. Identify all eligibility issues. Before you proceed with a payday loan, make sure you are eligible and able to repay. Rules concerning eligibility may vary by lender, but are likely to involve income, age and other factors. Be sure you understand these before you apply for a payday loan. Information that a payday lender may require of you includes:
    • Proof that you are over 18 and a United States citizen.
    • Your contact information, including a telephone number.
    • Your social security number (only some companies will require this).
    • Proof that you are employed and that you receive a bi-weekly or monthly payment of more than a certain amount (the amount will vary depending on the company). You can use payment stubs to prove your employment.
    • Proof that your bank account has been open for a certain period of time (some companies may only require you to have had the account for a month, while others may ask for 90 days).
    • Give a valid email address, where people can contact you even if you’re far away and not available over the phone.
  2. Visit a payday loan office. When you go into the office, you will be asked to fill out the application form. Make sure to read the entire application before beginning to fill it out. Have the lender clarify anything that you are confused about, and ask her to point out the different fees that you may be charged.
    • Assess all the fees involved closely. Keep an eye out for these in the fine print of the agreement, and avoid getting into a loan that is more expensive than it first appeared.
    • The Truth in Lending Act requires that these sort of companies need to be transparent about the fees they will charge you, so ask the lender outright what fees may apply to your loan.[3]
    • Once you have confirmed that you agree with the information contained in the application, fill it out.
  3. Establish the value of your next paycheck. Payday loans are made with that amount in mind. Lenders will consider your basic recurring expenses and then probably limit the loan to a percentage of your monthly or weekly income. For example, if your paycheck is generally $1000 every two weeks, the lender may cap the amount you can borrow at $500.
    • This may not sound like a lot, but bear in mind that if you borrow $500 you have to pay it back in two weeks alongside the loan fees.
    • This might result in you being short of money for the following two weeks, which may prompt you to consider taking out another loan.[3]
    • Work with the lender to establish an appropriate amount for the loan, but always be wary of someone offering to lend you money you may not be able to pay back on time.
  4. Write out a check and leave it with the payday loan officer. Once you have determined the amount you are going to borrow, the lender will charge you a fee. This fee is the interest rate that will be based on the amount you are borrowing. The lender will have you write out a check.
    • For example, you may be charged $25 for every $100 that you borrow. If this is the case, then you have a 652% APR (annual percentage rate).
    • By presenting the cost of the loan as a one-off charge, the rate of interest on the loan can be somewhat obscured.
    • While a payday lender may charge hundreds or even thousands or per cent of interest, bear in mind that a credit card typically charges around 12% APR, and a bank loan around 7% APR.[4]
  5. Pay off your payday loan on time. You will most likely be given until your next payday to pay off your loan. When that day arrives, the lender will cash your check. If you have enough money in your account, then your transaction with the lender will be over. If you do not have enough money in your account, the lender will charge you a fee that will increase the longer you do not pay off your loan.[4]
    • If the cost of paying off the loan leaves you short for the following weeks, resist the temptation to rollover the loan, or get another payday loan.
    • Think of alternatives and avoid getting trapped in escalating payday loan debt.

Improving Your Credit Score

  1. Assess your credit rating. To help you avoid using payday lenders, you can try to build up your credit score to access more mainstream and less expensive loans. Start by assessing your current credit score. You can get a free copy of your credit report online through various websites. Check the score for errors, such as having a late payment on your score when you were not actually late on your payment.
    • If you find an error, call up the credit bureau or reporting agency and set up an appointment to correct the problem.[6]
    • If there is information that is accurate, but doesn’t properly reflect your current situation, you can address this.
    • For example, if you got into debt when you were unemployed, but are now back in work, you can explain this.[7]
  2. Manage your credit cards responsibly. When you have credit cards and instalment loans, it is very important that you make your payments on time. This can help to build up your credit score in the future. When you show that you can manage your credit cards responsibility, the credit bureau may consider you less of a risk.
    • Write sticky notes and place them on your computer, refrigerator, or door, to remind yourself when you need to make your credit payments.
    • Set reminders for the week before, and the day before your payments are due. You should also set one for the day that they are due.
    • You may also be able to set up reminders through your bank account that will then send you email or text reminders of your upcoming payment.[6]
  3. Consider setting up automatic payments. If you have a hard time remembering to make payments, change your account settings so that your accounts will automatically make the payments for you. Keep in mind that you should still check your accounts and payment dates frequently in order learn how to manage your money wisely.
    • If you have payments going out which you lose track of, you may become overdrawn and incur charges from your bank.
    • Set up reminders before automatic payments are due so you can ensure you have enough money in your account to avoid this.
  4. Consider getting a prepaid credit card to build up your credit. There are a few prepaid credit and debit cards out there that may allow you to begin building up good credit when you use them. The concept behind a prepaid debit card is that you have already paid for the amount on the card, so you will not miss a payment and get bad credit. You should keep in mind that prepaid cards generally charge fees.
    • For example, you may be charged 2.5% on everything you purchase with the card
    • There may be a charge to add more money to the card.[7]

Warnings

  • Before signing any loan agreement, do a final review of all interest rates and fees, as well as future interest rate "rollovers". (Those occur whenever a borrower fails to pay back the entire loan on time.)
  • The Federal Trade Commission and other watchdog agencies often warn borrowers that many payday lenders are notorious for sticking borrowers with excessive debt.
  • Be sure that the payday lender you are selecting is licensed in the state because every state will have its own set of rules and regulations that govern cash advances.

Related Articles

Sources and Citations

  1. ↑ https://www.moneyadviceservice.org.uk/en/payday-loans/self_service
  2. ↑ http://money.usnews.com/money/personal-finance/articles/2012/08/22/how-to-lend-money-to-family-and-friends
  3. ↑ 3.0 3.1 3.2 3.3 http://www.consumer.ftc.gov/articles/0097-payday-loans
  4. ↑ 4.0 4.1 4.2 http://www.credit.com/loans/loan-articles/the-truth-about-payday-loans/
  5. ↑ http://moneyaware.co.uk/2013/07/how-do-i-get-out-of-payday-loans/
  6. ↑ 6.0 6.1 http://www.myfico.com/crediteducation/improveyourscore.aspx
  7. ↑ 7.0 7.1 https://www.moneyadviceservice.org.uk/en/articles/how-to-improve-your-credit-rating
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