Payday Loans for People
with Bad Credit

Why You Must Avoid Payday Loans for People with Bad Credit

If you have a bad credit and you need a quick loan and if you want only a small amount of loan for a very short time, you may consider payday loans for people with bad credit.

Payday loans are very short-term loans granted for repayment by the next payday. For example, if you want $500 loan, $1000 loan or $1500 loan quickly, and only for a short time, you may want to apply for a payday loan.  Payday loans are only given till a borrower receive their next paycheck.  Therefore, the term of the loan will depend on how far away you are to your next paycheck.

Although a payday loan is granted till the next payday, the payment period can be extended from the next payday to the one that follows and the one that follows after that.  In other words, payday loans can be granted for up to 90 days. Here is A Guide to Seeking Personal Loans for People with Bad Credit.

Anyone can apply for a payday loan but most people who go for payday loans are people on low income who find it difficult to survive on their pay check or find it difficult to wait till the next pay day to get paid.

The next statement that I am about to make may be a bit of a generalization but tend to be true.  That is, many people who go for payday loans tend to be people who have bad credit and cannot get a normal loan from a bank.  Therefore, many payday loan products are often designed with people with bad credit in mind.

Interest rates on payday loans can be very expensive, but if you have a bad credit rating, you may find it difficult to borrow money at lower interest rates.  If you need a quick small loan, your best option will be to apply for payday loans for people with bad credit, which is charged at a higher interest rate.

Lenders to people with bad credit like to protect themselves from the risk of default by charging higher interest rate, although personally, I can’t see how charging higher interest rate can directly protect the lender form loan default.  One may rather argue that the high interest rate may make it difficult for borrowers to pay off the loan, thus increasing the risk of default.  The situation becomes more like a self-fulfilling prophecy.

Charging high payday loan interest may put borrowers into a perpetual bad credit position. That is, because of the high rate of interest and the compounding effect of the interest on the loan, and the higher amount of installment payments they have to make, a borrower may not be able to pay off their loans or credit cards.  For example, it is not unusual to see a payday loan interest ballooning to over 450%.

Because of this the borrower, who already has a bad credit, enters into a deeper bad credit situation.  Then, because of the worsening bad credit history, they can never get a loan from the banks.    Then because they need money again, they go back to the payday loan companies and get hit again and get again and they default on the loan. Their loan status gets reported to the credit reference agency and their credit file is amended with their new default.  This leaves them in a perpetual never ending bad credit situation.

In view of the above, it is important to avoid payday loans for people with bad credit.  It is better to go for other forms of bad credit loans, like installment loans for people with bad credit.  With that kind of loans, you will still qualify for a loan, despite your bad credit status.  However, the advantage of installment loans is that you don’t pay the full loan by the next payday.  The loan can be spread over a longer period of time, sometimes up to 36 months.

If you are looking for a quick loan, click the apply now button on this page, fill in the form and get approved for an installment loan at a better interest rate than a payday loan.  The loan can be paid over 36 months.