Payday loans for those with a bad credit history are readily available with each application considered on its own merits. Interest rates will reflect the individual circumstances of each application, and loans are now available up to a 12-month term.
While many still associate payday loans with relatively short term finance, regulations allow loans of up to 12 months in duration.
Due to their relatively high-interest rates, there are a number of factors to take into consideration.
What Is a Bad Credit Payday Loan?
This product is focused on those who have bad credit histories and require relatively short-term financial assistance. While the traditional payday loan is for no more than £100 and repaid within 30 days, the term can be extended under current regulations to 12 months.
The industry itself is now heavily regulated by the FCA, and the potential long-term liability of each customer is capped. While regular payments over a 12 month period may be relatively high, compared to more traditional sources of finance, for those with a bad credit history, their options may be limited.
What Interest Should I Expect on a Payday Loan?
In general, the interest charged on payday is much higher than more traditional sources of finance. As a rule of thumb, depending on a customer’s financial status, rates of up to 1500% (on an annualised basis) can be quoted.
For those with exceptionally challenging credit histories, the annualised rate could go above and beyond this figure. So before you apply for a payday loan, whatever the duration, it is advisable to review your finances, credit history and credit rating.
Are there any improvements you can make before applying?
Applying for a Payday Loan With Bad Credit Rating
While there were no guarantees that all applicants with bad credit histories will be approved, this sector is specifically targeted at those with challenging finances. Each applicant will still need to provide evidence of income, employment details and an ability to cover repayments going forward.
For more relatively straightforward applications, the Internet and smartphones are very useful. It is perfectly plausible to take just a few moments to fill in a payday loan application form with many companies offering an immediate decision.
Upon approval, the funds could be in your bank account within just 15 minutes!
Where applicants with extremely challenging credit histories are applying for above-average loans, over an extended period of time, further consideration may be required.
The payday loan company may require additional information before making a decision. The fact that the majority of payday loan applications are made online means that this can be done in the comfort of your own home at a time convenient for you.
How Can I Improve My Bad Credit History?
Each individual in the UK has a credit file which holds details of loan applications, current debt, missed payments, etc. This provides a snapshot of an individual’s financial status, which enables lenders to make decisions on applications for finance.
Any financial issues experienced will remain on your credit file for six years and can impact future applications even if your finances have improved. The best way to improve your credit history is to ensure that all of your future financial obligations are met.
Timely payment of rent, loan repayments, utility bills and any other financial obligations will cast you under a more favourable light going forward.
There may be occasions where you can discuss a recent improvement in your finances with a potential lender. Whether there is scope to reflect your improving financial position with a reduced headline loan interest rate is debatable.
Even if your financial circumstances have improved in the short term, there is still indisputable evidence of financial difficulties in the recent past.
Would Multiple Payday Loan Applications Impact My Credit Rating?
Each time you make a loan application, this will leave a footprint on your credit history for other lenders to see. While in theory, multiple applications may not necessarily indicate financial difficulties, they can often suggest an inability to manage your finances.
As you want to give the best impression of your financial status when applying for finance, it is not advisable to make numerous applications in a relatively short space of time.
Taking a scattergun approach to loan applications can have a seriously detrimental impact on your credit history. So, you need to do your research, find an appropriate lender charging fair rates and then move forward with your application.
If you are rejected by one payday lender then, as they tend to use the criteria, you may experience the same result elsewhere.
Do I Need a Guarantor for My Loan?
The simple fact is that the less risky a loan is seen by a lender, the lower the interest rate. Lenders work on a very basic risk/reward ratio whereby borrowers seen as relatively risky would need to pay a higher than the average interest rate.
However, even if you have a troubled credit history and in reality, a loan application may be borderline approval/rejection, a guarantor would help. In effect, the guarantor will remove an element of risk because, in the event that the borrower defaults, the guarantor will take over repayments.
The role of a guarantor is very important, but there could be significant financial consequences to consider.
In a perfect world, a guarantor would certainly assist in securing short-term finance, but all parties need to clear their potential liabilities.
There are some loans available where you don’t need a guarantor, we have written extensively about these loans here, ‘Our Guide To Very Bad Credit Loans With No Guarantor Lenders‘.
What if I Am Struggling With Payday Loan Repayments?
If for some reason, you are have experienced further financial difficulties, you should contact your payday loan provider and discuss the options. It may be possible to extend your loan over a longer period of time which could reduce repayments to an affordable level.
Those who simply bury their head in the sand are simply storing up problems further down the line.
While the average payday loan is for no more than £100 and often repaid within 30 days, under current legislation payday loan companies can offer short-term finance with a 12-month repayment term.
For those with bad credit histories, they will experience higher than normal interest rates and need to balance the duration of a loan against the interest charged and what they can afford.
How Can Flexy Loans Help?
Here at Flexy Loans, we have partnered with some of the UK’s leading Lenders.
They have already helped thousands of people get loans already, and they can do the same for you.
Choosing a loan broker like us (we don’t charge any fees) means our application process matches you with the best loan available to you. All lenders we recommend are regulated by the FCA, which gives you an additional layer of protection.
To apply and see what loan is available to you, click on the below and answer the questions.