A lot has been said in the past about payday loans for poor credit, both good and bad but mainly bad. However, the loans can work as they are intended to work if they are taken out correctly and repay on time. One area in which this type of loan does work extremely well is meeting emergency financial outlays.
What Are Classed As Emergency Financial Outlays
An emergency financial outlay can be anything that crops up that requires money that you do not have until your next payday comes around. For instance:
- You find yourself in unauthorized overdraft;
- You need money to pay for repairs to your vehicle;
- A large household appliance breaks down;
- You forgot to budget for the MOT for your car;
- You forgot to pay off that large bill and the final demand now needs paying before your next payday.
Any of the above situations might be considered a financial emergency. If you know you could overcome any of these situations on your next payday, but it is some time away, a payday loan might be suitable to get you out of the short-term mess.
What Do Payday Loans for Poor Credit Entail?
Payday loans are easier for people with poor credit ratings to find approval for as the amount of money is only on the small scale and the loan is paid back quickly.
As you are not borrowing a large sum and wanting to spread the repayments over a long period you are not seen as such a big risk even with a poor credit rating.
Small Sums of Money Are Offered
Most lenders offering payday loans will offer in the region of £100 to £500. This is usually more than enough to cover an unexpected financial outlay. However, if more money is needed, you might want to consider a short-term loan offering up to £1,000, which can be spread out for up to 12 months.
Payday loans, on the other hand, can be taken out for a maximum of three paydays (months), this is, of course, assuming that you are paid on a monthly basis.
Lenders will want to know your paydays when you apply for a payday loan. If you only want to borrow for one month and pay off the loan in full with interest, they will only be interested in your first payday. If you want to spread the loan out over three paydays, they will want the dates of these paydays.
The lender will either take the full sum of the loan back with added interest or spread the cost including interest over three paydays. With this in mind, you do need to make sure that you will not be left without money when your payday or paydays come around.
Verifiable Income and Affordability
When applying for a payday loan the lender will need to know how much income you have each month, and what you payout. This will go towards them deciding if they think the loan is affordable. No ethical lender is going to offer credit if your finances show you have no way to repay the loan as agreed.
When talking about a regular monthly income the lender means income from paid work, or they will consider some types of benefits providing they are paid on a regular basis.
Interest on Payday Loans
If you repay the loan in full with any added interest on your next payday, the loan is cleared as it is paid in full and this is the cheapest way to borrow with a payday loan. Spreading the cost of the loan for over three paydays can make the monthly repayment smaller but more interest is added on, so borrowing costs more in total.
Interest is shown As APR (annual percentage rate)
Interest is calculated into payday loans for poor credit on a daily basis but it is shown as an APR, which is the annual percentage rate. This can be confusing to someone taking out a payday loan. The APR is the interest that would be added onto the loan if you were to take it out over the year but you are repaying within one to three months only. Therefore, you only pay a small part of the APR.
It does show you that if you don’t repay as planned and if you were to keep rolling the loan over, borrowing this way would be extremely expensive. Providing you repay on time the loan can work as intended, to provide a way for you to get hold of money fast in an emergency.
As you have a poor credit rating, the APR will be higher than what someone might get with a good credit rating. On a more positive side, if you allow us to help match you up with a lender we can put you in contact with lenders who offer the most competitive rates possible based on your circumstances.
Loan Compatibility Criteria
As with any type of loan in the UK, some criteria need meeting. This applies regardless of your credit rating and the type of loan you are applying for. To apply for a payday loan you have to:
- Be 18 years old at least;
- Have a regular income preferably paid into a bank account;
- Have a bank account in your name;
- A debit card is attached to your bank account;
- The lender can set up a direct debit on your bank account.
Of course, this is only the criteria to be able to apply for a loan. Just because you meet this criterion, it does not automatically mean you will be accepted for a loan.
Payday loans for poor credit may be a suitable option for anyone with bad credit who needs money fast to meet any emergency financial outlay. The loan can work as intended but only if you know without a doubt that the loan is affordable and you can repay it on time. Apply today with our help and you get an instant decision.