What are Payday Loans and How Can They Affect Credit Scores?

What are Payday Loans and How Can They Affect Credit Scores?

Finance is one of the ruling grounds that determines a business or an individual’s success, especially if we are talking about Kick-Starters or new entrepreneurs. In fact, finance can be defined as a foundation pillar that upholds the business or individual majorly. At a time like this, entrepreneurs, who have mastered management or marketing, are often limitedly exposed to the world of credit scores and finances. This is one of the major reasons why most businesses have problems gathering funds or reputable financial cushions in the initial stages. 

To sum it in a nutshell, a good credit score is extremely important if you want creditors or investors to put trust and faith in your endeavor. A good credit score would allow you to get better loans easier and faster. On the other hand, a bad credit score means higher interest rates and lower investor interest which means you might need to get in touch with the Credit repair services to get it fixed. This brings us to the topic of what payday loans are and how we can channel payday loans and whether or not they’ll affect our existing credit score rates or not! 

Payday Loans 

To begin with, let’s take a look at what payday loans are. Payday loans can be defined as a small-dollar loan that comes with high-interest rates and a short loan term. This means these loans are easier to acquire and only requires the borrower to hold a credible bank account and some proof of identity and income. The borrower can access up to $1500 in cash which they are expected to pay back with the finance charge. Since no credit check is involved in these loans, borrowers are often appealed to this. However, do keep in mind, payday loans can be very risky since the payback term allotted is quite short and the interest rates added to it are quite stiff and high. 

Moreover, the small-scale loan obtained by the borrower is often repetitive in number which leads to a debt-trap in the long run if you’re not careful enough. The Consumer Financial Protection Bureau revealed that 4 out of 5 payday loan borrowers either default or renew their loans, not once, but multiple times. This is also probably why payday loan borrowers often turn to credit repair services to help them fix credit score fast.

The Payday Loan Process Explained 

Now if you’re considering a payday loan and wondering how to get one- here’s what you need to know. You need to visit a payday lending store or website and show the lender your bank statements and identity for verification purposes. The lender hands out the cash to you with a due date within which you have to pay back the loan in person. If you’re doing it online, the money will be transferred to your bank account and the loan amount and the finance charges need to be credited to the lender’s bank account on the next payday. 

Does Payday Loan impact credit scores in any way? 

Now we come to the most important part of the topic, will a payday loan affect your credit score and if it does can you fix credit fast. The truth is, a payday loan is not likely to affect your credit scores since the lender seldom or never runs a credit check. In fact, making timely payments will not improve your credit score either. However, if you fail to your payday loan on the given due date, defaulting on the loan can negatively impact your credit scores. 

How does payday loan convert good credit scores to bad? 

The payday lender usually asks you to write a post-dated check for the next payday date. Now if your account does not have sufficient funds including the interest rate by the due date and if you don’t renew your payday loan, it’ll result in a bounced check. Now, if you fail to repay the bounced check, your account will be closed by the bank and the collections agency will report this as a credit default immediately alerting the credit bureaus. This entire process will then reflect negatively in your credit score.

How Can I Fix My Bad Credit Scores? 

If you’re already living with a bad credit score, or you’re scared your credit might get affected, we have just the solution for you in mind. Hire Credit Repair Services to help you fix credit score fast! If you’re wondering, how can I repair my credit? your credit repair agency will have a list of credible and viable options waiting for you. From pulling up your bad credit to ensuring your good credit scores remain constant without fluctuation, a credit repair agency will be the best possible way for you to convert you negative credit rates into positive.

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