If you are grappling with bad credit scores and you are in need of a short and quick loan that can be easily obtained, payday loans can be a good option for you.
Payday loans are:
The very ‘unique selling point’ of payday loans is their quick and instant approval. As a part of a drive to remain instant, payday loans are generally approved without a credit check. What this really means for you, as an applicant, is that you can get a payday loan when you really need it, regardless of what health your credit score is in.
If you have ever approached a bank for a loan, you would know that without a credit check, you will not be able to get a loan, even when you have a strong and regular source of income in place.
One poor piece of money management can make your credit score take a plunge, leaving you reeling - despite having a job. That’s why, it’s important to know that payday lenders offer small loans that do not take into account your credit score.
What is taken into consideration, however, is your source of income. If you have a regular source of income that’s good enough to help you pay the loan back come your next payday, lenders will generally not hesitate in approving your loan application and you can rest assured that your credit score will be irrelevant as far as approval of a payday loan is concerned.
At this point, inquisitive readers may wonder why it is that payday lenders deviate from the standard practice of using credit scores as ‘financial health checks’, and it would be well in order to address those doubts.
As the name suggests, payday loans are granted against the payday. In other words, as long as a lender is satisfied with the regularity of your income, your application will be approved. This, in no way, involves credit scores because credit scores tend to reflect a cumulative effect of years of monetary transactions and activities.
Hence, payday lenders do not feel the need to perform credit checks, making it possible for them to approve payday loans quickly and effectively.
Even though it’s true that your credit score won’t play a decisive role in the status of your payday loan application, it needs to be noted that your credit history can be checked by payday lenders.
This is in compliance with the rules and norms for small loan disbursement set up and overseen by the Australian Securities and Investments Commission. These norms state that at any given point of time, an individual can have one and only one payday loan/small loan against their name.
Hence, to make sure that you don’t have any other outstanding payday loan, payday lenders may check your credit history.
Every payday loan you take (and even apply for!) will be reflected in your credit history in the following format:
The frequency of your payday loan application and the subsequent checks made by payday lenders will appear in your credit history. So, it’s better to apply for a payday loan only when you really need one.
If you apply for a payday loan and your application gets approved, the amount of money loaned to you will appear in your credit history.
Further loan details such as the interest charged to you, loan term agreed upon, repayment schedule etc. Will also be mentioned in your credit history, after your application is approved.
If you are not able to repay the loan on or before the due date, you will be charged additional defaulter fees or extension fees as agreed upon in the loan agreement. These fees will also reflect in your credit history. Similarly, if enforcement procedures need to be followed by the lender in order to extract the loan amount from you, charges pertaining to that will also be mentioned.
Even though payday lenders sdon’t check credit scores before making a decision regarding a loan application, it should always be kept in mind that a payday loan has the potential to affect your credit, in both positive and negative manner.
If you apply for and receive a payday loan from a registered payday lender, it will automatically be logged into your credit history, as explained earlier. If you keep by all the due dates and repay the loan in full (with interest and other applicable fees) on or before the due date mentioned in the agreement, it will be considered as a successful repayment.
Also, whenever you apply for any sort of loan in future, lenders will be able to see that you have a track record of successful repayments and that will only increase your chances of getting more loans.
In the same vein, if you do not repay the payday loan you have received from a lender on or before the due date, it will be considered to be a defaulted payment.
Most payday lenders will issue at least two reminders to let you know that you have defaulted on the repayment. If you still are not able to repay, legal intervention may be sought by the lenders.
Defaulting on repayments and/or requiring an issuance of enforcement directives from a court will hurt your credit score.