The majority of payday loan takers are people who have bad credit history, low incomes or a combination of both. Having no credit or poor credit is a major stumbling block to getting a loan because such people are viewed as high risk customers who might default and leave the lender holding nothing but an empty bag.
The sad reality is that until such people raise their credit score, they won’t fit the standard lending guidelines that traditional, big banks have to follow, forcing these people to approach pay-day loan companies for short-term and high-priced payday loans.
This is a situation that can actually help a great deal though as the pay day loans are such short term loans and so it is only to bridge that gap that you may have. You can pay the loan back very quickly and so avoid any further damage to your credit rating and as it is only for a few days the charges are not going to be so huge (remember that the interest rates are given annually but the loans are usually only for much shorter periods and so while they may sound astronomical, they are in fact not so bad). So it is often very worthwhile to use such a short term loan to avoid other problems, for example, you may have a credit card bill that lands a few days before payday, you can afford it but would have a missed payment were you not to use the assistance of a payday loan. You can usually get an instant pay day loan which can cover your bill and be repaid a matter of days later ensuring that you do not have a huge interest bill to worry about.
A bad credit history could be due to multiple reasons beyond the control of the person themselves. He/she may have struggled in the past to find access to credit or other financial services or simply had been hit hard due to the crash of the financial system. Apart from these, there are a huge number of people who quite simply don’t have a bank account, or are just outside the reach of the pervasive financial industry. Thus, even if it might not be of their own doing, they just can’t have access to finance from the mainstream providers whose main criteria rests upon credit checks and prior history. To cater to these people, there are a number of companies that provide access to payday credit which can come in immensely handy for tasks that otherwise would remain unfulfilled due to there being no access to cash. Most of these companies have structured payday loan programs that don’t rely on a credit history as being the main precursor, but rather, are interested in the overall picture of the borrower. The majority of these programs allow such people to take smaller loans to begin with, but as they return the initial amounts, they become entitled to larger and less stringent payback requirements.
So, in essence people with bad credit histories still have multiple options when it comes to access to loans, but since nothing in the world is free, they have to be careful in terms of choosing the right company, which is registered and has proper licensing, rather than simply going to the first one that they can find.
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