Many payday loan lenders are likely to think that those with bad credit are a risky proposition. This is because of the fact that even if you have worked hard to improve your credit rating, bad credit can still result in being refused a payday loan.
Despite this, the risk involved in bad credit is often not as great as many believe. Here are some ways that bad credit may affect the chances of you getting approved for a payday loan.
When it comes to things like credit cards and loans, most lenders will have a default rate of around five percent. With a bad credit rating, the chance of having poor credit scores far exceeds the default rates of these other lending sources.
One of the major reasons why lenders will shun someone with bad credit is due to the fact that they know that they may not be able to make good on any payments on time. With the financial crisis in full swing, most lenders are experiencing a difficulty trying to keep their heads above water.
In order to combat this, payday loan lenders have begun looking at the credit rating of those seeking a payday loan. By doing this, they are gaining insight into what the future holds for their customers.
If you have bad credit or a history of late payments, your credit score is likely to have suffered more than it would have otherwise. That is because of the fact that lenders do not take chances with those who may be in the early stages of foreclosure or bankruptcy.
When you submit additional information to get yourself approved for a payday loan, you will be asked to fill out some forms that will reveal your financial situation. Your past credit score is likely to be the main factor used by these lenders when deciding whether or not you are likely to pay your loan off on time.
This information is very important to these lenders, since it is one way of making sure that they have a means of protecting themselves against the amount of risk they are taking with an applicant with bad credit. Additionally, the lender will also use this information to help them determine how much risk is acceptable for them to take with the payday loan.
The bottom line is that lenders with bad credit simply do not want to take that much risk with the person requesting the loan. Instead, the best solution is usually to use your personal credit card to pay off the money you borrowed.
If you do find yourself needing to apply for a payday loan and have bad credit, the first thing to do is apply with a number of different lenders so that you can compare rates and see which one will be the best fit for you. For some, it may be a matter of trying one lender before you finally decide on one.
If you do find that your credit rating is bad enough to make it difficult for you to be approved for a payday loan, try not to panic. As with all credit situations, it is vital that you stay calm and continue to monitor your credit report.
Lenders will usually let you know what credit score you have been assigned once you have requested for a payday loan. This is only when you have completed a payment plan and made it through the process of paying back the loan in full.