What is a Payday Loan and Bad Credit Loans? | Features and Benefits
The article offers information about features and benefits of bad credit loans. If you are looking forward to find answers to’what is a Payday Loan? you have reached the right page.
If you find it harder and harder each month to make ends meet, and you are looking for a reprieve in the form of a cash injection then you’re not alone – honestly. How can you be so sure there are others struggling with exactly the same cash flow and bad credit issues? Because of the advent of pay day loans and bad credit loans.
You are not the only one for who an unexpected school excursion means a budget blow out, and you are certainly not the only one who has paid their phone, water and electricity bill late, to the detriment of their credit report.
So why is this good news for your situation? Because it means that there is financial help out there, and there are lenders who understand your needs perfectly and won’t judge the fact that you’ve had to put the groceries on credit again.
What is a Payday Loan?
A pay day loan is when a lender advances you funds against your next pay check, and you pay off the loan on your next pay day. Your salary acts as the security against the loan and gives you quick access to funds when you need them.
Features and Benefits of pay day loan
- Instant Approval
- Online Application
- Age Limits
- Secured or Unsecured Loan
- Minimal Interest
- Income Verification
- Direct Loan Deposit
- Flexible Re-payments
- No Credit Check
The pay day lender knows how important it is that you receive a loan against your salary as quickly as possible, so will make sure that your application is approved the same day in most cases.
To speed up the applications process, you can apply for most pay day loans online where you provide all of your details, and the contact details of your employer so the lender can email, call or fax them to verify your income.
In most cases you must be at least 18 years or older to be considered for a pay day loan.
Secured or unsecured loan
You can structure a pay day loan as an unsecured loan which does not require collateral, but this does mean you will pay a higher interest rate. Using a pay day loan as an unsecured loan also means that your possessions and assets can never be repossessed to repay the loan amount if you default.
While the interest rate on a pay day loan is usually higher than a normal loan, the loan term is much shorter. Therefore, over the 15 to 20 days of your pay day loan, there is little chance for interest to accumulate, no matter what the rate.
The amount of the pay day loan you can be approved for will depend on your income and your ability to repay the loan.
Direct loan deposit
Once your pay day loan is approved, it will be deposited directly into your bank account, usually within 24 hours of approval.
When you apply for a pay day loan you can choose how the loan is repaid, and you can have the full amount debited from your account on your next pay day, so you don’t have to remember to make the payment. Or if you want to spread out the repayments, you can have installments debited over several pay weeks.
No credit check
Most pay day loan providers will be concerned with your current income and ability to repay the loan, so in most cases won’t conduct a credit check. This means you can be approved for a pay day loan even if you have bad credit.
Before you apply for a pay day loan, keep in mind the dangers such as:
- A Short Term Solution
- Pay Day loans Banned
- Repaying Interest Charges and Fees
A short term solution
If you have a short term financial problem, then a short term solution such as a pay day loan is not dangerous. However, if you are using a short term solution to patch up a long term problem such as an inability to budget or living beyond your means, then you are going to get into a cycle of pay day loans, without learning to live within your means.
Pay day loans banned
The US government does not look favourably on pay day loans, and as such have even banned pay day loans in some states. In other states there are strict rules to regulate the distribution of pay day loans because of their financial dangers.
Repaying interest charges and fees
While your next pay check may easily cover the extra $300 you need this week from a pay day loan, what about the extra $100 payable in interest and fees? Can you still meet all of your other bills and living expenses with a $400 dent in your next pay check? Plus, if you default on the loan you can be charged even more fees and the interest will continue to compound into an even larger debt.
Features and Benefits of Bad Credit Loans
Finding yourself with bad credit can be as simple as not knowing you had an overdue phone bill, or as complex as losing your job and not being able to meet your mortgage repayments anymore. Whatever the reason is that you have been rejected for a loan, there are lenders out there who will look at your credit history as only part of your eligibility criteria.
When you apply for a bad credit loan, you will be getting:
- An Unsecured Loan
- Your Interest Rate
- Higher Interest Rates
- Riskier Loan Amounts
- Variable Interest Raes
- A range of Bad Credit Loans
- Loan Features
An Unsecured Loan
Unsecured loans are typically a more flexible type of lending as they don’t rely on collateral as security for the loan and you can be approved for a bad credit loan even if you have a low credit score.
Your Own Interest Rate
When you apply for a bad credit loan, the lender will still have a look at your credit report, as this helps them determine your level of risk, and in turn calculate an interest rate to reflect that risk.
Higher Interest Rates
The interest rates offered on bad credit loans are usually higher than those offered on standard secured loans because lenders want to make the risk they are taking worthwhile.
Riskier Loan Amounts
The amount you need to borrow on a bad credit loan can also affect the interest rate you are charged. For example, if you need a small amount, you can be charged a higher interest rate, because you are seen as a higher risk if you can’t manage your short term funds and pay day loan rates can apply.
Variable Interest Rates
To make sure you can afford your bad credit loan, you will need to factor in future interest rate rises because if the Federal Reserve raises interest rates, then the interest rates and repayments on your loan can also rise.
A Range of Bad Credit Loans
You can often apply for a bad credit loan through a broker, and your broker will be able to compare the available loans and find you the best deal and the lowest interest rate.
If you want to be able to manage your loan more easily, look for a bad credit loan which has the option to make additional repayments, so you can repay the loan sooner when you have extra cash, and save on interest.
At the same time, there are plenty of people willing to take advantage of your situation and your feelings of desperation at not being able to be approved for a loan. Therefore, you need to make sure you are not a victim of a bad credit loan scam.
How to Spot a Bad Credit Loan
While you may need to pay some fees when applying for a mortgage with bad credit, usually scams asking for an advance fee will guarantee you the loan, while no legitimate lender would guarantee to lend you money without some assurance you would be able to repay it.
You call a 1900 number. Other scams will have you call a 1900 number where you are told to choose your loan. You are then kept on the line for so long that the scammer makes money from your phone charges.
You are asked not to send money through the post. If the loan company asks you to send money to them in some other way than through the post you should be suspicious of a scam because there are strict mail fraud laws in the US which means scammers usually try and avoid receiving payments through the mail. Instead, they will usually ask you to wire them the money.
They are not in the US. Most bad credit loan scams are operated from Canada or the Caribbean but there are also numerous other places scams can originate so check all of the lender’s other credentials.
They ask for your personal details without giving you documentation. A legitimate lender would not ask you for your social security number, bank account number or credit card number without providing you with some written documentation on your loan. Also avoid giving out this information over the phone.