Will Having a Payday Loan Change my Credit Score?

We can often get quite concerned about our credit score and rightly so. Our credit score will determine what loans we can get as well as sometimes whether we can rent an apartment or even get a job. There are things that we do that can have positive or negative effects on our credit score and it is good to be aware of these so that we can keep it as good as possible.

Why is our credit score important?

Our credit scored is looked at by many people and is used to help them make decisions about you. For example, if you are applying for a loan or mortgage then it will be looked at to see whether it is felt that you are a risky prospect. If you pay everything on time, then this will go in your favour but if you do not then it will be held against you. It could also be looked at by landlords as they will want to make sure that you are likely to keep up with your rent payments. It may even be looked at by future employers and they may judge you based on your ability to manage your money. This means that it can be very important for your future to ensure that you have a good credit score.

How can a payday loan influence it?

Your credit score is made up from information about your finances. This is information about your past and current finances. So, if you have had unpaid debts or not kept up with payments on something like utility charges this will all be on your credit record. Any current loans and contracts will be listed on there as well as details of your salary. If you keep up with all of your payments, then this will go in your favour, even if they are loan repayments. However, if you miss repayments then this will show up and count against you. You will also find that if you get turned down for a loan this will count against you. Other lenders will see that you were turned down and they may decide that they will not lend to you, just based on that one thing. Therefore, you need to be careful what you apply for. A payday lender will not turn you down based on your credit score and so there is less risk when you apply to a payday lender of being turned down and this working against you.

So, if you take out a payday loan and repay it when requested, this could show up as a positive on your credit record. However, if you take out a payday loan and do not manage to repay it on time, then you could end up with a negative item on your credit record. You will need to think hard about whether getting one is the right thing to do.

Should I get a payday loan?

It is wise to only ever take out a loan if you are confident that you will be able to repay it on time. This is true for a payday loan as well as any other types of loan. With a payday loan, you will be repaying all of the money that you owe in one go. This is a risk in some ways, as you will have to find a large amount of money to repay the loan. Obviously, the amount that you have to repay will depend on how much you borrow in the first place. It is therefore sensible to work out how much you will be able to afford to repay before you take out the loan. Look back at bank statements and your checking account to see how much you would normally be able to afford. Think about whether you will be able to budget and manage that way. It might be that you only need a small amount which you will be able to repay. Or it could be that you will be able to cut down your spending in order to afford it. Maybe you can think of some ways that you will be able to earn more that will also help you. It is worth actually doing the math and working out whether there is a method where you will be able to afford it. Consider the likelihood that you will be able to stick to this as it is easy to plan things but much harder to stick to them in reality. It could be wise to plan to cut back a lot more than necessary so that you have spare money just in case something else crops up.

If you are completely confident that you will be able to manage the repayment, then this loan could be suitable for you. However, if you are not very sure, then it could be better to not get the loan as it could have a negative impact on your credit score. It is something that only you will be able to calculate and decide on. It depends on whether you feel that you will be able to manage that repayment.

Are Payday Loan the Best way to Borrow?

There are many different ways of borrowing. You might feel that there will be one method that is superior to others and therefore you will always choose that method when you are buying things. Perhaps you might think that it is payday loans that will be the best way.

It is worth noting that because loans differ, it means that they suit different needs. It might be that you will need a certain type of loan at one time and then a different type for something else. It is therefore worth knowing when a specific loan is useful and then you can consider it when you need something like that. For example, a payday loan will suit certain purposes but not others, so it is good to know when it will be useful and then you can consider it if you are in that situation.

When you need money quickly

It if you need money in a hurry then a payday loan could be the solution for you. Payday loans can often be organised within a few hours and that means that you can get the money in your bank account extremely quickly. Most other loans will take a lot longer and this is why the payday loan can be preferred. The application process can take a lot longer to be approved with other lenders compared with the few hours or maybe even less that you can take with a payday loan. The lenders will vary though and it is wise to check how long it will take if you need the money really quickly.

When you do not want a credit check

Payday lenders do not do a credit check. This means that if you have a low credit score and are worried about being turned down for a loan, then a payday lender could suit you really well. You will find that there is never a credit check done and so there is no chance of your being turned down for the loan on this basis. This is because payday loans came about to help those that had a poor credit score and were unable to get help elsewhere. Therefore, they have never had a credit check as part of the loan. There are, in fact, very few ways that you can be turned down for a payday loan, normally if you are a minor, not a US resident, have no checking account or regular income. These are usually the only criteria you have to fulfil in order to be accepted.

When you want to repay quickly

A payday loan is repaid very quickly. You will normally have to repay it in full when you next get paid. This would be in less than a month. This can be really great for anyone who is not keen on the idea of having a loan and worries about being in debt. They will be able to get the debt repaid really quickly and therefore this worry will not last long. Repaying in one lump sum can save the concern about whether you will be able to cope with monthly loan repayments as you will clear the debt all in one repayment.

When you do not want to borrow much

A payday loan is restricted to being no more than £1,000. This means that you only usually borrow a few hundred pounds. This can be great if you just need to borrow a small amount of money. Often with a loan, you have to borrow a large sum of money. If you just need a little it means that you have far more money than you need. This means that you can be tempted to spend all of that money and then you will have to spend a long time paying it back. It can be tricky to have to find loan repayments for a long period of time and you might find that you will have to budget for a long time and that might be tiresome. You might find being in debt for so much money stressful as well.

So, if you need to borrow money quickly, do not want a credit check, do not want to borrow too much and want to repay quickly, then a payday loan could be the best loan for you. It will very much depend on what you need from a loan as to whether it will suit you. This is why it is always worth thinking about what your requirements are and then deciding which loan fits those requirements the best. This might seem like it will be difficult, but it is not that hard, just think about how much you want to borrow, when you want to repay it, how much you can afford to repay and how often and whether you have a good credit score. Once you have this information then you will be able to choose between loan types in order to find the one that is most suitable for you.