Posts Tagged ‘payday loans affect credit score’

Effects Of Payday Loans On Your Credit Score

Though there are no direct effects of payday loans on your credit score, there are several things that you need to take into your careful consideration in this regard. It is very important for you to keep in mind that payday loans work differently as compared to conventional loans, such as personal loans. The qualifying criteria are much simpler and even the approval comes much faster (usually within a matter of just one or two business days; in many cases, within just a couple of hours), but at the same time, there are certain risk factors as well that you must take note of.

How Is Your Credit Score Calculated?

In order to get a better understanding about the effects of payday loans on your credit score, you must first understand how your credit or FICO score is actually calculated. There are five major factors that affect your credit rating – debt repayments (whether you are making the payments toward your debts and bills in a timely manner or not), overall outstanding debt balance (how fast your debt balance is reducing and how fast you are accumulating new debts), credit utilization ratio (how much debt you have taken and how much credit limits is available to you), your credit history and the applications for new credit (how often you apply for new credit).

The Effects Of Your Credit Score On Your Eligibility For Payday Loans

When you apply for a new loan, lenders usually look into your credit report first; if you have good credit history, your application gets approved easily and you are even offered a low rate of interest. On the other hand, if your credit score is not good enough, your application is likely to be rejected straightaway. However, sub prime lenders may still offer you a loan but at a much higher rate of interest and other charges. But, this

is how it happens in the case of conventional lending programs, such as personal loan. As far as payday loan are concerned, lenders do not check your credit report at all. You can easily obtain a payday cash advance even if you have bad credit. In short, your credit score does not affect your eligibility to borrow payday loans.

Failure To Make The Repayment In Time

The effects of payday loans on your credit score can be very damaging, especially when you fail to repay the loan in time. Since payday cash advances charge extremely high rate of interest (usually in three digit APR), the overall outstanding payday debt balance grows very fast, making it very difficult for you to manage things on your own. When debts becomes out of control and unpaid for a long time, it damages your credit score in such a harsh way that it becomes tough nut to repair it back to its healthy status.

Therefore, if you are considering borrowing a payday loan, you must first have a repayment plan ready with you. If you cannot afford to repay these easy but expensive cash advances in time, you should never go for it. In fact, you should always look for better, cheaper alternatives whenever you need cash urgently.

Custom Search

Basic Things You Must Know About Bankruptcy Dismissal

When you file a petition for bankruptcy and the court rejects your petition on certain grounds, it is legally termed as bankruptcy dismissal. Dismissal means your case is officially closed and that the court will make no further rulings on your case. Some of the most common reasons why a petition is...

Credit Repair

Building Credit With No Credit

When it comes to building credit with no credit, there are several online canadian pharmacy factors that you need to take into account. Just because you do not have any credit history at present, it does not mean you will never have one. No one is born with a readymade credit history. You have to gi...

Credit Repair

A Loan To Defeat All Loans Debt Relief Loan
Payday loans fax-free payday loans and instant online payday loans are everywhere be it on the Internet newspapers or television. Today when the economy is in turmoil these loans look like the saving gra... Read more

Tips On How To Consolidate Payday Loan Debt
You may need to consolidate payday loan debt when you are caught in the middle of a financial crisis arising out of your inability to repay multiple loans. Debt consolidation loan allows you to consolidate all... Read more

Do Not Put Up With Debt Collectors Harassment
There was an emergency and the need arose to take a payday loan. It seemed to be the fastest and the best option available then. However now the debt collectors harassment is horrendous. The fact that using t... Read more

Consolidate Payday Advances To Save Yourself
Payday advances are loans taken against a persons paycheck. They have a way of digging into your paycheck month after month. They usually have exorbitant interest rates though the sites offering the services... Read more

Can I Consolidate Payday Loans
Can I consolidate payday loans is a question you are sure to ask yourself when faced with a trying financial situation. When payment of loans becomes difficult it is possible to consolidate and replace many... Read more

What are the pros and cons of debt consolidation?