Whether you’re borrowing to purchase a home or car, you’ll almost always hear the loan provider inform you about applicants having to undergo a credit check before any loan application is approved.Do payday loans affect credit?
If bad credit is the main thing hindering you from obtaining a loan successfully, you’ll be happy to know that it’s not a requirement when it comes to payday loan companies.
What is a Payday Loan?
Before we get deeper into the reasons why bad credit matter naught to payday loan companies, let’s discuss first what a payday loan exactly is.
Payday loans are short term loans – rarely lasting more than half a month and you’ll know why later on. Their amount ranges usually from $100 to $1,000. Exactly how much you can borrow is usually based on your preferences and income.
Payday loans can be borrowed anytime, but they do have universal laws when it comes to paying them off: you have to pay them off on your next payday.
Why Bad Credit Doesn’t Matter to Payday Loan Companies
It’s mainly the payment methods used for payday loans the reason why these companies don’t mind what your credit rating is. It wouldn’t even matter to them if you’ve excellent or the worse credit.
Their preferred payment methods make those numbers pretty much inconsequential.
Your Bank Account Will Be Accessed
The first payment method allows the payday company to automatically and electronically access your bank account on your payday. Upon access, they will be able to retrieve the total amount due from your account.
Although permitting a second party to access your account seems hazardous, the chances of getting ripped off are pretty slim. What you should really about is having adequate money in your account to cover your loan.
The Loan Assessment Process Is Thorough
Payday loan companies will be able to know when they have to access your account because of the investigation they performed regarding your employment. When you’re applying for a payday loan, you might notice a number of specific questions regarding your work, and those are what allow them to determine whether you’re a good credit risk or not.
Not only will they make sure that you’re working for the same company you’ve enlisted in your application form, but they’ll also confirm with your company how much you’re earning and which dates of the month do you receive your paycheck.
If You Can’t Meet The Payment,Be Prepared For Hefty Fees And Charges
The second payment method is less risky for you but still provides adequate protection for the payday loan company. This time, you’ll have to issue a check from your own checking account for the total money owed. This check is postdated and will only be deposited in their account on the given date.
Whichever method you end up choosing, the payday loan will still come up the winner. If you can’t cover your loan on time, you will have to shoulder the interest charges for that month. It’s hefty, but at least it’s not as big as the money you borrowed.
This Is Your Chance To Re-Establish Your Credit Rating
Income verification is also another reason why bad credit doesn’t matter. By confirming exactly how much you’re earning, the company will also be able to compute the reasonable amount of money that you’re allowed to borrow.
Thus, when applying for a payday loan, you need not worry about having good or bad credit. If you want something to worry about, make sure you’ve got yourself a great job and your own bank account.