Quick payday loans are becoming an increasingly popular way to improve a poor credit rating as they offer a short term lending option for people who may ordinarily be refused a traditional unsecured loan. As a matter of fact, in the current unstable financial climate, it can be difficult to maintain or rebuild a good credit history.
Quick Payday Loans Offer Borrowers a Short Term Loan of Small Amounts
Quick payday loans offer borrowers a short term loan of small amounts and can usually offer instant decisions and provide same day cash, sometimes within as little as one hour after approval. With many lenders offering a simple online application process there is none of the complicated paperwork usually associated with applying for a loan. Loans are usually offered over periods of between seven and thirty-one days and repayment is to be made in full. Due to the higher risk of offering unsecured loans over such short times, especially to individuals with bad credit, lenders do charge a fairly high interest rate and a lending fee to cover administration.
Quick Payday Loans are Often Available to Those With a Poor Credit Record
An individuals credit rating is affected by any type of borrowing including credit cards and traditional secured and unsecured loans. Late payment of certain household bills can also affect credit scores. If you have a poor credit rating, many lenders and credit cards will reject applications. This lowers your credit even more as unsuccessful loan applications leave a negative mark on your credit record. However, quick payday loans are often available to those with a poor credit record. If you can prove you are employed and able to repay the loan on your next pay date you will be considered by most cash advance lenders. This can improve your overall credit score over time as you not only receive a positive mark for a successful application, but also for making full repayment of the loan as agreed. Studies show that around 13% of those applying for instant loans do so on a semi-regular basis for the main purpose of improving or rebuilding their credit score.
Potential Borrowers Should Take into Consideration the Cost of Quick Payday Loans
However, potential borrowers should take into consideration the cost of quick payday loans. Not only will you be charged a lending fee and a high interest rate, but in the event of you being unable to repay the loan on time you may be charged a substantial penalty. This will also affect your credit score. It is common for lenders to arrange a direct repayment from borrowers, either in the form of a post dated check or a direct bank transfer.
In conclusion, quick payday loans can offer a feasible way to improve a bad credit history, however if you are unsure about your ability to pay the loan back in full on the agreed date then you are best to avoid taking out such a short term loan for this purpose. You should instead consider only using cash advance loans when you have a financial emergency such as an urgent household repair but do not have the funds to hand to cover the cost. Quick payday loans should be used only after careful consideration and research, just like any other financial decision.