If you're worried about your credit score keeping you from being able to qualify for a loan, you'll be happy to know that that isn't an issue if you take out a payday loan, because payday loan lenders don't check your credit to determine your eligibility. 🙅🔎
Lenders only administer a soft credit check — which doesn't negatively impact your credit like a hard credit check — to verify things like your identity or to ensure that you're not in active bankruptcy.
Learn: Where can I get a payday loan?
These loans are specifically designed for individuals with limited credit history or low credit scores and who may not qualify for loans from traditional lenders such as banks or credit unions. So, your credit standing is not a determining factor for a payday loan.
Instead, lenders primarily look at your income and employment status to decide your eligibility for a payday loan. They want to see how much you earn from your job, to ensure you're "good for it", and they extend you a loan based on your proven ability to repay.
Because payday loan lenders don't do hard credit checks and have very few requirements, you can qualify for a loan much faster than you would with a loan from a bank which often requires things like collateral and extensive paperwork.
However, this doesn't mean that a payday loan should be your go-to solution when you're short on cash. Because they don't run a credit check in effort to qualify you, payday loans are considered high-risk loans. As a result, they often charge a high bi-weekly fee (typically $10 to $30 for every $100 borrowed) that results in a VERY high APR (i.e., 261% to 782%).
Learn: How is the interest rate on a payday loan calculated?
This can make it hard to pay off your payday loan in full, which causes many people to renew their loans and get stuck in a cycle of debt. 😬
Even if you have poor credit, you should look at other lending options before turning to a payday loan. For example, some lenders offer personal installment loans for bad credit, which offer more manageable repayment plans and more favorable rates, even if you don't have a great credit history. Trust me, it pays off to do your homework and consider all of your options before making a big financial commitment!
Borrow wisely. 🙂