Do fast payday loans have a negative impact on your credit score? Know before you borrow – we’re sharing what you need to make great choices.
Your car broke down, and you need money to fix it.
Or, maybe you had an unexpected home repair.
Whatever the reason, you need money sooner rather than later.
Taking out a fast payday loan is a quick solution when you need it.
But how can it affect your credit report?
Check out this guide for everything you need to know.
What is a fast payday loan?
It’s exactly what it sounds like:
Fast cash to see you through until your paycheck.
And it is cash, not a credit card.
After approval, the funds are transferred to your bank. You can spend it the way you normally would.
Withdraw the funds, or use your bank card, it’s your choice.
Who is loaning me the money?
There’s a lot of controversy surrounding payday loan companies.
And like anything, there are a few predators out there.
But the government and the industry are working hard to fix that.
Make sure that you do your homework before taking out a payday loan.
- Is the company licensed?
- What are the terms and APR?
- How fast is “fast”? Make sure you’ll get it when you need it.
A company with nothing to hide will share this info with you readily.
And finally, make sure you’re comfortable with your lender.
If not, find another: it’s your money, use it wisely.
Make sure you know your rights as a borrower under the law, too.
What can I use it for?
A payday loan is cash when you need it.
It can help you cover:
- Unexpected medical expenses
- Car repairs
- Home repairs
- Other unexpected expenses that can’t wait
Don’t do a payday loan if you’re having a night out and think you’ll be short.
Responsibility is the name of the game if you want to keep your good credit.
Like with any borrowing, make sure you know how it will affect your short-term budget, too.
Here are some tips on how to budget brilliantly.
Positive or negative: what’s a fast payday loan doing to my credit?
As with any type of credit or loan, a payday loan can either help or hurt your credit.
Here’s what happens:
You’ve decided to take out a small loan. You understand the terms and the repayment schedule. You’re comfortable with your ability to repay the loan on time.
Congratulations, you’re a responsible borrower.
We all have emergencies sometimes and need a little help.
Make sure that you follow your plan, and repay your loan as agreed.
If you do that, your credit report will show a positive result.
However, if you don’t follow through, it can hurt your credit.
While it may only be a small amount, any sort of default may harm your future borrowing.
What do other lenders see on my credit report?
Let’s say you’re applying for a new car loan or mortgage.
The bank will see your payday loan on your record.
While it may not carry the same weight as another type of loan, it does matter.
Repay it successfully and it shows you’re responsible with your money.
If you default or are late, it can be a red flag to other lenders.
What if my credit is already not-so-great?
Things happen, and they can show up on your credit report. You should take steps to fix them, but that won’t help you today.
Each lender is different, and has different rules.
If your credit score is poor, it can affect your interest rate, too.
Make sure you know the full terms and rates before you agree to the loan.
Are there other options?
There are other ways to get money in the short term.
Your employer may have an emergency advance program.
And here are 9 ideas you can use to get extra cash before you need it.
Things to avoid if you get a fast payday loan
We’ve explained what questions to ask and how to choose your lender.
Here are some other common mistakes people make that can also affect your credit.
Too many loans, one after another
It can be easy to get caught up in taking out a loan, then paying it off.
You may like you need to take another one out right away.
Before you borrow, understand how the repayment plan will change your budget.
Plan for it to keep from feeling like you need another, immediate loan.
Applying at several different lenders
Likely you’re taking a payday loan because of some sort of emergency. And you’re probably in a hurry.
But a little bit of time now can save you issues later.
Do your homework and pick the right lender before you apply. Don’t just Google the ones nearest you and start applying.
Each lender application will show up on your credit report.
Too many inquiries (even without loans) can make your credit look bad.
Rolling the loan over
While this is better than defaulting, do what you can to pay off the loan.
Rolling one loan into the next can also be a sign you don’t have a firm grip on your finances.
Check it out
The best way to know how a fast payday loan affects your credit? Keep an eye on your credit report.
There are three credit bureaus, and each may have slightly different info.
Make sure you check all three and correct any mistakes.
Checking your credit report regularly can also help you prevent identify theft.
The bottom line
Payday loans are a loan, much like any other.
How it affects your credit depends completely on you.
Your repayment (or lack thereof) is directly reflected on your credit report.
It’s important to understand that so you can be a responsible borrower.
We’re here for you
At Pretty Penny Loans, we’re here to help you when you need it.
Our short approval process gets you the answers you need, fast.
We treat each person as a person, not just an application.
If you need fast cash, let us help.
Get started today.
And, if a short term loan has saved you in the past, drop us a comment. We’d love to hear from you!