Is Credit Important With Payday Loans?

Filed in Credit Score, Personal Finance by on April 30, 2013 1 Comment

Most people have likely heard of the payday loan concept by now, and many have even used one to help out during a rough financial spot.  Payday loans are intended as a short term loan that you’re supposed to pay back from one of your pay cheques in the near future.  They don’t help with any long term issues, and it is important to read the fine print when you decide to apply for one.

There are many storefront payday loan places, and now online payday loans are also popular.  Obviously, they offer more convenience than having to go out and apply in person.  People usually have a lot of questions about offline and online payday loans, one of which is whether or not your credit score is important.

What If Your Credit Is Bad?

There really is no concrete answer when it comes to your credit score and online payday loans.  All of the different lenders have their own parameters that they stick to when issuing the loans, and credit is one of them.  Some lenders will prefer that your credit score be decent, while others are more lenient.

Since the pay cheque is like collateral against the amount of the loan, some lenders aren’t overly concerned with what has happened in the past.  They still might look into it to make sure you aren’t a serial loan dodger or something, but a blip or two may not matter too much.  You have to give your banking information and show proof of employment, so if the payback amount is to come straight from your bank, they won’t be as concerned.

Be Careful

If you do have questionable credit and you’re still approved for the loan, make sure you’re really in a position to pay it back on time.  Taking out an online payday loan and then not paying them back will quickly turn your questionable credit situation into a bad one.

Great Credit Scores - Numbers on Speedometer

Feeling like you’ve gotten away with something by getting the loan to just make your credit situation worse, isn’t a smart move on any level.  Read the terms of your agreement, consider the potential issues you might face, and then decide if it is something you can handle.  Even though it is a short term loan and the amounts are never too high, you can still get into trouble if you don’t take them seriously and don’t pay them back on time.

Jennifer Jackson is an avid journalist focused on helping Canadians make smart money decisions. On her spare time, you can find her reading a book or spending time with family and friends.

Comments (1)

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  1. Hello,
    Payday loans are considered as unsecured loans therefore there are very less online lenders who will check credit scores before issuing a payday loan. It’s correct that before applying we must think about repaying these loans. You have given very great information about payday loans. It will be more helpful if you give details about the interest rates on payday loans. Thank you.

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