Payday loan agencies offer short-term loans to those who have suddenly found themselves in dire financial straits. It is a kind of thing that nobody is absolutely secure against: material damage, loss of money due to theft, scam, or robbery, having to make a big purchase right away, etc. Needless to say, not all of us have standby cash to cover such expenses. If that is the case, a payday loan is the first thing that comes to mind.
One reason why we choose payday loan instead of a bank loan is that you can get it right away. Payday loans do not require lengthy procedures or a heap of papers, like banks do. Oftentimes, a few phone calls or emails are enough, and your ID and employment paper may be the only documents you are required to submit.
Although advantages of payday loans are quite evident, there are serious pitfalls as well: interest rates can be extortionate. Improper use of payday loan services can get you in a deadly trap overnight.
How do payday loans affect my credit record?
Usually, payday loan agencies do not request credit histories, because they do not get any grants for that. However, in some cases, a payday loan agency may influence your record. There are two common ways how they do that.
- First, if you are in a serious financial bind and have failed to pay back on due date several times, a payday loan agency may sell your debt to a third party collector agency. In turn, this third party may share this information with a record reporting agency like Equifax, Experian, Trans Union, etc. Once your record reaches these, it will become available to any potential crediting organization.
- Second, if you default on your loan, the agency may go for a legal action against you. Judges often choose to make such information public. If it happens in your case, your poor credit history will become available to potential creditors. In both cases, you will have problems when applying for your next loan.
Can a payday loan positively influence my credit history?
Payday loan agencies do not usually report failures to pay on time to credit report agencies, and that is, definitely, good news. However, there is some bad news: they do not report timely payments either. Even if you do wonders and deserve the status of a credibility champion, none of this information will reach any public sources.
As follows from the above, there are only two ways a payday loan can affect your background: either blemish it or leave it unchanged!
What if I get too broke to pay on time?
If you realize that things are getting too tough, contact your lender and apply for an extension. Most payday loan agencies provide extensions for a fee. Also, you can withdraw a sum from your credit card or borrow cash from your loved one or friend.
How can I avoid trouble?
Borrowing money is a sort of addictive: even a small number of consecutive loans can produce a snowball effect and get you in a serious financial bind. Before filing for a loan, please, make sure you have enough money to pay back on the set date. Make sure you have a stable employment status.