A poor credit rating can prevent any
consumer from being able to get access to finance, particularly from
traditional sources. Due to the banking collapse and continued global financial
slowdown, lenders have to be even more particular about who receives loans and
who doesn't. Invariably this means that many with a poor credit history suffer.
However, one solution may be a payday loan.
Most payday loan providers have a
much more open policy when it comes to lending. Rather than excluding some
applicants on the basis of their credit rating, they are willing to consider
other more prevalent factors - such as salary.
The unfortunate thing about the
credit rating system is that a consumer can be downgraded due to historical
irregularities. It is a snapshot of your financial history over the last six
years and therefore issues from your past can have a huge impact on your
present rating. Therefore, whilst it is a solid indicator, there are inevitably
some issues with the system that mean hundreds of thousands of people can't get
finance.
Fortunately, payday loan providers
don't need to be particularly concerned about a borrower's ability to repay in
the long-term. With the full amount of the loan, as well as any associated
charges being payable within a month, credit history is almost irrelevant. It's
a short-term borrowing solution; therefore factors such as monthly salary are
given far greater importance.
This is why some companies don't run
credit checks at all. Whilst this might not be universal throughout the industry,
it's certainly not all that uncommon. The most likely deciding factor is what
you're bringing in each month.
Most payday loan providers will
therefore have a minimum salary expectation for applicants. Again, this is
variable and will be entirely dependent on the company you choose. However, a
likely guideline for monthly income is somewhere between 500 and 750 pounds.
Whether this is paid at the end of the month or weekly often won't matter, as
long as the final amount eclipses this minimum threshold.
There will always be exceptions to
the rule. For instance, many lenders won't consider self employed applicants.
Regardless of their average take home pay or credit rating, the instability of
this form of work is a deciding factor.
As a result of this open approach to
lending, many borrowers have decided to take up a payday loan in deference of a
bank loan or other long-term borrowing option. It has enabled many consumers
with a poor credit history to still get the cash that they need. Of course this
comes with as many risks as it does benefits.
The positive aspect is that finance
is available if you need it. This means that if a crisis happens in your life
that you don't have the money to cover or that overspending during a particular
month could have significant long-term implications, you can get a quick cash
advance.
However, on the flipside, this ready
availability of finance makes it easier to abuse. Therefore many people who
don't have a solid financial footing and may struggle to manage repayment, can successfully
apply for a loan which will either land them in further trouble or that they
will be unable to repay.
This added risk has meant that the
interest rates on many payday loans have remained extremely high, often
equating to around 25% of the amount borrowed. However, this should not put off
those who genuinely require cash in a hurry, but will hopefully do more to
deter those who could experience long-term difficulties due to improper
financial management.
So to briefly summarise, payday
loans are available to a far greater cross section of society, including those
with a poor credit history. Whilst acceptance is certainly never guaranteed,
other factors - including salary - are prioritised far more so when compared
with a conventional bank loan.
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