Payday Loans

How to Borrow Payday Loans for Bad credit?

Payday Loans for Bad credit

The pandemic has crumbled the global economy. COVID-19 in the UK severely affected the job market and the consumer economy. The furloughs and wage cuts that followed this economic loss further crumpled our day to day cashflow. Despite support schemes and initiatives by the government, it has been challenging to sustain the financial crisis.

Not all of us have ample savings to tide over to the next month. Several high-cost short-term lenders are lending cash advances. If you’ve been through a financial crunch like this, the chances are that you may have considered a payday loan.

Pay loans have a notorious reputation in the lending market, but is it justified? Let’s find out!

 

How to find the best payday loans for bad credit?

A payday loan is a high-cost short-term loan that people borrow as a cash advance during emergencies. You can pay off this loan over a week or a month, depending on the repayment period that you choose. Payday loans are common among people with a low credit rating looking to borrow a quick loan to cater to a short term cash crunch.

Payday loans are also referred to as instant payday loans because they are usually disbursed in the borrower’s account within hours. While borrowers perceive payday loans as a fast and convenient option, there’s more to them than meets the eye. It is essential to understand the interest implications of these loans.

The average APR of payday loans sometimes exceeds 300%, with exorbitant interest rates. To safeguard the interest of the consumers, the FCA placed a price cap on these loans, prohibiting payday lenders from charging inconsiderately.

Ever since the FCA implemented stricter regulations and capped payday loans and other high-cost short-term credit options, there has been a substantial drop in the number of payday lenders. The number of borrowers have, however, grown. But, lenders who continue to lend payday loan must comply with the FCA regulations and work towards improving the market reputation of HCSTC (High-Cost Short-Term Credit) providers.

Tech giants like Google and Facebook also bore the impact of these regulations. These companies have now restricted explicit financial advertisements. The FCA’s initiative is a pivotal step in ensuring fairer credit opportunities and uprooting consumer exploitation from the lending industry.

 

Is there a price cap on payday loans for very bad credit?

Numerous consumer complaints followed the rampant rise in the popularity of payday loans. After this, the FCA intervened and started regulating the payday lending industry. The FCA capped interest rates on payday loans to secure borrowers’ interest, ensuring that lenders don’t exploit them.

For every £100 borrowed, the lender cannot charge more than £24 for a loan with a tenure of 30 days. If you happen to miss a payment or don’t pay an instalment on time, the maximum default charge that a lender can impose is £15 plus the interest on the amount borrowed. The price cap also ascertains that you don’t end up paying more than twice you’re the borrowed amount to your payday lender.

 

How to apply for online payday loans for bad credit?

  • Decide on a loan amount: Work out a loan amount that aligns with your income and expenses. Choose an amount that you can afford to repay, even during a crisis.

 

  • Assess your credit score: Check your credit score before applying for a loan. If you have a bad score, you may not qualify for better interest rates. In such cases, wait out for your score to improve over a series of regular payments. Plus, you will have some time to dispute any erroneous items or unidentified enquiries on your report.

 

  • Apply online: Online applications are convenient because you can apply from any location or device as long as you have internet access. Be meticulous while supplying your details since the lender may mistake a human error for attempted identity fraud. Fill in your desired loan amount and term, and then wait for the lender’s offers.

 

  • Compare offers: Lenders offer proposed rates based on a soft check. Once you choose a suitable offer, they will assess you through a hard credit check.

 

  • Wait for disbursal: After the contractual formalities are complete, the lender will disburse the loan amount into your bank account through wire transfer. The payout is usually quick, but it depends on your bank account provider. You can then use the money as per your requirement, albeit responsibly.

 

  • Repay the loan: It is important to repay your payday loan as soon as you can. The longer you stay indebted, the more interest you accrue. If you can, set up a direct debit to ensure timely repayments.

 

Can I borrow payday loans for bad credit on benefits?

You can borrow a payday loan for bad credit even if you’re a benefits claimant. Many payday lenders are open to help applicants who claim benefits.

 

What are payday loans – no credit check?

No credit check payday loans are high-cost short-term loans advertised to lure customers with a bad credit rating. These borrowers are usually:

  • Applicants who want to avoid the damage that a hard credit check will cause their credit score.
  • Applicants with a poor credit score fear that lenders may not lend them money with a credit check.

It is after you choose an offer that the lender runs a hard credit enquiry. If you come across a lender who doesn’t carry out a formal credit check at all, it would be wise not to enter into a credit agreement with them. The FCA regulates payday loans. With that, each payday lender is legally required to run a proper credit enquiry into the borrower’s credit profile, thus proving that no credit check loans are merely a marketing gimmick.

Lenders who advertise this product carry out a formal credit check. The only difference is that they do not let your credit score drive their lending decision.

However, the concerning part is the sky-high interest rates imposed by no credit check payday lenders. Average APRs for these loans can sometimes exceed 400%. Additionally, there is no gauge of your ability to repay this loan. Most borrowers are people requiring urgent cash who may not have the opportunity to look for alternatives. Thus, they find themselves ensnared in this HCST credit trap. While no credit check payday loans may seem like a handy option, you should understand the entwined interest implications and make an informed financial decision. It is best to borrow an amount that you can afford to repay, even when things take a different course.

Conclusion

There are several Brits who borrow payday loans, despite the risk it poses to their financial stability. It may be wiser to look for alternatives before choosing this option. Weigh the pros and cons of each credit option before taking a call.

Leave a Reply

Your email address will not be published. Required fields are marked *