No one will argue with the idea that traditional lenders are not as willing to lend to applicants with poor credit histories than to those with excellent ones. It is a well-known fact after all. However, we can argue with the idea that a getting personal loans with bad credit histories is impossible.
The fact is that there are more sources for loans than banks, and that means more opportunities to secure funding. The growth of online lenders is one example, while an increasing number of private lending companies have also sprung up. And with each new course comes new products.
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For those of us with very poor credit scores, payday loan approval is the easiest to procure. But how can these be secured, and what are the pros and cons of taking on this type of personal loan?
What is a Payday Loan?
The problem with applying for personal loans with bad credit is that lenders are unsure about the likelihood of default. Normally, a low credit score would suggest a bad loan repayment habit, but this is no longer the case with many bad credit borrowers victims of economic conditions.
Securing payday loan approval is not such a major issue because the payday loan is structured to reduce the possibility of missed repayments and defaulting. This is done by minimizing the repayment period, with most periods only 30 days, and by basing approval on monthly income, and nothing else.
So, as long as your monthly paycheck is large enough to cover the loan repayment (with interest), usually in one go, approval is practically guaranteed. But as accessible as this may seem, there is a drawback to this kind of personal loan.
Terms to Expect
Having access to a personal loan with bad credit is a major plus for many bad credit borrowers, but this kind of break does not come cheaply. In fact, payday loans are amongst the most expensive loans out there, with interest rates as high as 30%.
And given that repayment in full is between 30 days and 90 days, and comes directly from their paycheck, that places a lot of pressure on the borrower to meet normal monthly expenses too. For example, a $1,500 loan will typically costs $1,900 to repay it in full, which is a large chunk to be taken in one month.
This explains why, for payday loans, approval is confined to small loans only. $1,500 is the maximum, though special arrangements may be made to borrow more (thus the 90-day repayment term). A lower personal loan principal increases the chance of the full repayment.
Applying for a Payday Loan
It is not difficult to find a payday loan online, but checking out the specific terms is important. While 30% interest rates are common when seeking these personal loans with bad credit, it may be possible to get one at 25%, or even 20%, so take time to shop around before submitting an application.
Providing proof of income and employment is essential to getting payday loan approval, so be prepared to send copies of pay slips or tax returns. It is also necessary to provide details on a bank account, from which the lender can withdraw repayments automatically.
Thankfully, the approval process is completed very quickly and loan funds can be accessed with a few hours of submission. So, this kind of personal loan is ideal when trying to access funds to deal with an emergency.
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