There is a lot of confusion surrounding payday loans, and whether or not they are guaranteed loans for people who have a bad credit rating. Being honest and ethical we thought it was time to debunk the myths surrounding guaranteed payday loans for bad credit and lay down some truths about them.
Myth One – Payday Loans are guaranteed
Anyone with a poor credit rating who wants to take out a loan will cling to just about anything if it means they believe that they can get a loan at a time when it is most needed.
Some lenders will claim in search results that payday loans are guaranteed loans. This leads anyone with poor credit to believe that if they apply for the loan, no matter how bad their credit rating, they will be approved automatically. Sadly, this is not the case.
No ethical lender is going to guarantee a loan without first looking into the credit history of the person applying for the loan. There is simply no guarantee that you can get a payday loan. However, payday loans are one of the easiest types of loans to be approved for if you have a poor credit rating when comparing them to the personal loan, which allows you borrow more money over a longer period.
Myth Two – There Are Specific Loans for People with Bad Credit
There are no specific loans available for people with bad credit. People who have a less than perfect credit rating can apply for the same loans as those with a good credit rating and vice-versa.
However, some types of loans might be easier to receive approval for if you do have poor credit. These are the:
- Payday loan;
- A short-term loan;
- Guarantor loan.
While anyone, with good or bad credit, can apply for a loan, there is never any guarantee of your being accepted. However, as you are requesting to borrow a smaller sum of money and repay it back fast, with the payday loan, there is more chance of you being approved.
Myth Three – Payday Loans Are the Most Expensive Loan
When looking at the interest rate of payday loans you could be forgiven for thinking a payday loan is the most expensive type of loan to apply for.
This is not entirely true, as you also have to take into account that the payday loan is taken out only over a short period. This period is generally between one and three months. This means that interest is not applied over the year as with the personal loan.
Any type of loan can become a huge debt if you find that you cannot repay it and you have late repayment fees and interest added on, which keeps accumulating over time. The payday loan is a small loan, usually between £100 and £500, which is paid back over one to three paydays, so it is borrowing over the short term.
Myth Five – Payday Loan Lenders Rip You Off
When payday loans first came onto the market, many companies were established to jump onto the bandwagon and specifically offer payday loans to people. At this time, the payday loan market was not regulated as it is today and there were some unethical lenders who added on gigantic sums on interest and fees. On some occasions, the amount borrowed was pushed to more than twice the original sum borrowed.
Here at Bonsai Finance, we are not direct lenders, instead, we work alongside a panel of ethical lenders who offers competitive rates for people looking to borrow a small sum of money and repay it back quickly. The lenders we work with offer affordable loans.
Forgot All the Bad You Heard About Guaranteed Payday Loans for Bad Credit
If you have only heard bad things about payday loans you might want to forget everything you heard in the past and look at the loan with a fresh perspective.
The payday loan is no better or worse than any other type of loan providing you understand the loan, the terms and conditions of it and what is required. In addition, you can afford the loan and repayments and it will not get you deeper into financial difficulty.
Payday Loans Are Suitable Over the Short Term
A payday loan can be a suitable loan for anyone who is suffering from short-term financial difficulties. It is a loan taken out for a small sum of money, usually between £100 and £500, repaid within one to three paydays.
Providing you have checked the full terms and conditions of the loan and know exactly how much the loan is going to cost you in full, and when you have to make the repayments, it can be a short term lifeline. A payday loan is not a loan that can be relied upon over the long term. It is not advisable to enter into the payday loan and repay it only to borrow another sum of money and continue in a circle like this.
Payday Loans Are Suitable Meeting Financial Emergencies
Payday loans are loans that are suitable for finding money to meet the odd emergency that has cropped up. This could be:
- To pay a bill that you had forgotten about but the final demand has come through;
- You need to buy a new tire for your car after getting a flat and not having a spare one;
- A major appliance that you cannot manage without, such as fridge-freezer or cooker, has broken down and you need it repairing.
These are just three examples where you might want to get hold of money in the short term and know that you would not struggle to repay it when you are paid.
Information about guaranteed payday loans for bad credit can and has been misleading in the past. However, hopefully, you will now have a better understanding of how the product works and in what circumstances they might be apt. For short term financial shortfalls as one-offs, the payday loan should work as it is intended to work; however, it is not suitable as a long term plan for borrowing. We can help to match you up with a lender who considers your ability to be able to repay the loan more than your credit rating and who offers affordable loans.