A bad credit payday loan is a form of personal finance designed for those with less than perfect credit profiles. Many banks do not advertise a bad credit loan as a product, but will accept those with a poor credit history for their personal loan product. There are banks who do have specific loans designed for those who don’t have an amazing credit profile. Therefore when comparing these products, it’s important to note that the representative APR might be deceiving. If the loan isn’t designed just for those with bad credit, the advertised rate is likely to be lower than what those with imperfect credit histories can expect to be offered.
What differences are there between a traditional bank and an online lender?
Loans for individuals with a bad credit history are offered by both traditional high street banks and the newer online financial institutions. The lender panel includes both lenders aimed at the general market, and those focusing on customers with a bad credit history. A customer is often likely to get a better rate by borrowing from a newer lender as they do not have the overheads of traditional banks. They need to attract customers with a low interest rate rather than purely on the basis of brand recognition. However the rates advertised by lenders offering payday loans aiming at those with a bad credit history might seem particularly high by comparison. This is often not true in reality, as representative APR can be misleading and actual interest rates offered by banks to those with bad credit are often broadly similar.
There is however an advantage in sticking with a traditional bank if you have a poor credit history. Should something go wrong with repayments, or you wish to pay back the loan early, you are more likely to get an understanding employee of the lender that you can talk to in person at a branch. Online payday loan only providers do not offer this service.
Furthermore, if you already bank with the lender you are applying with, they can get a wider picture of you beyond your credit score and may be able to offer a better rate on the basis of this.
Why is it important to borrow only the amount that you need?
The interest rates on loans for people with poor credit history are usually substantially higher than typical personal loans. It is therefore important that you avoid taking out a higher loan amount than you require. Consider what other funds might be available to help you make the purchase you need. For instance if you are taking out a loan in order to get your car back on the road, consider asking family for a small loan to help reduce the amount you need to borrow, or put some of the debt onto a credit card.
How can I improve my credit profile?
Lenders who provide loans for people with bad credit history typically do not fix interest rates but instead base them on your credit profile. If you are able to improve your credit profile before applying, then the cost of your loan could decrease and you will have a better chance of being accepted by more lenders. Checking that you are within your limits on all your existing forms of credit (e.g. your overdraft, other payday loans, credit card) is one way of doing this. Paying back more than the minimum on your credit card is another way.