Is it Possible to Improve Your Finances and Credit Score with a Payday Loan?
Do you need cash right away? Do you need it fast? Do you need it for a short period of time to tide you over until your next payday? If so, a payday loan could be the answer to your financial prayers.
A payday loan is a small, quick loan that you take out from a payday lender—generally someone who works in banking or lending and targets people who need money quickly.
The idea is that by getting a small loan at once, you won’t have to depend on this source of money again for a while. And because the interest on these loans tends to be insanely high, taking one again will not be worth it soon after.
But should we all just give up and surrender to the high cost of finance?
Not necessarily! If you know where to look and if you follow some basic tips, it’s possible to improve your finances and credit score with a pay day loan. Let’s explore how!
How to Improve Your Finances and Credit Score with a Payday Loan
If you need a quick cash boost, a payday loan is an option. Generally, a payday loan is a short-term loan that is taken out from your next paycheck.
Since the lender charges a high APR (average annual percentage rate), it will quickly become too expensive to borrow again.
However, with a little know-how, you can lower that APR and improve your finances and credit score. Let’s take a look at how.
If you are struggling to meet everyday expenses and your next paycheck won’t be for a few weeks, a payday loan may be your answer.
Payday lenders generally charge an APR of between 450% and 550% depending on the location, so the loan could be extremely expensive.
However, the loan is only for a short period of time and then you can pay it back with your next paycheck.
What is payday loan
A payday loan is a short-term loan that is taken out from your paycheck. The lender charges a high interest rate (typically APR between 500% and 950% depending on the location) and then you can repay the loan with your next paycheck.
This means you will have to pay back the loan plus interest plus a fee for taking out the loan in the first place. Why would someone take a payday loan?
If you need quick cash and need it right now, a payday loan is your best option.
And while they are only available at specific times, there is nothing stopping someone from borrowing money if they really need it.
The questions then are why would anyone take out such a high-cost loan when they can borrow the same amount of money at a much lower interest rate and with no strings attached?
The main reason is convenience. Someone can borrow a payday loan and be done with it. They don’t have to wait for their next paycheck or deal with setting up another payment plan.
But that is not the only reason someone might take out a payday loan. There are a few reasons someone would take out a payday loan.
How does a payday loan affect a credit score?
Payday loans are reported to the credit bureaus as debt. That report will show up on your credit report and will have a significant impact on your credit score.
What will happen is that payday loan accounts will show up as “hard” amounts that are reported on your credit report as “$1,000 each.”
This will cause your reported credit amount to decrease and will lower your credit score. As a result, payday loan lenders may reject your application to borrow a loan in the future.
If payday loan lenders see a low credit score, they may also charge a higher interest rate.
With a poor credit history, is it possible getting a payday loan?
Yes! A payday loan is reported on your credit history as a “hard” amount. As a result, it will appear as a “hard” amount on your credit report and will lower your credit score.
If you have a poor credit history and you need a quick cash boost, instant payday loans online guaranteed approval is your only option. But that is not the end of the story.
There are a few things you can do to improve your credit history and make the credit bureaus less likely to mark you down.
Know where to get the best payday loan rates.
Before you take out a payday loan, check your bank rate to see what interest rate they are currently charging on loans.
You can find this rate by visiting your bank’s website or by calling your bank. If you see a good rate, do not accept an offer from the payday loan broker.
Instead, shop around for the best rate and stick with the lender who has the best rate. Once you decide on your lender, do not change lenders.
If at all possible, stay with that lender until your payday loan is complete. This will help you avoid switching lenders, which has a significant impact on your credit score.
Take out just one loan at a time.
While it may be tempting to take out multiple loans, it is important to remember that each loan has a significant impact on your credit score.
It’s best to take out one loan at a time so you can focus on paying that one loan off quickly.
Only borrow what you need.
Instant Payday loan is designed for one purpose only: to get you through a short-term financial crunch. At some point, you will have to decide how much you want to borrow and at what interest rate.
If you decide to borrow more than you need, you risk paying too much in interest and paying back a larger amount of money in the long run.
Check your credit before each new loan.
When you apply for a new loan, make sure to check your credit report for any new loans on your credit report. Pay attention to the amount, the lender, and when it was taken out to make sure it is on the right person.
Avoid lenders with bad reputations.
Payday lenders with bad reputations, are often associated with payday loan. Make sure you are only dealing with legitimate lenders.
If you need money quickly and need it in a short period of time, a payday loan may be your best option.
However, these loans are reported to the credit bureaus as hard amounts, which can significantly impact your credit score and make it more difficult for you to borrow in the future.
With a poor credit history, it could be difficult to borrow again without paying a higher interest rate.
If you need money right away and you don’t want to wait a few weeks for your next paycheck, a payday loan is an option.
But payday loans are high-cost loans and they can negatively affect your credit score.
Make sure to only borrow what you really need and stay focused on paying the loan off quickly so you can avoid making the same mistake in the future.