When a financial emergency strikes, most individuals take out a payday or bad credit loan. These options are suitable for borrowers turned down by conventional money-lending institutions. Are bad credit loans and payday loans the same? This post will walk you through each loan option, highlighting significant differences and similarities.
Bad Credit Loans
A poor credit score may not be a viable reason to prevent one from acquiring a personal loan. In fact, borrowers with a credit score lower than 629 may receive several loans offers from various lenders. The best bad credit loans have a low APR (Annual Percentage Rate). However, there are other aspects to consider when selecting a bad credit loan provider.
Lenders accept borrowers with thin credit histories and scores and those with good credit scores (690 and higher). Like other loans, bad credit loans have fixed rates that can be repaid in installments. The loan amount varies from lender to lender and ranges from $1000 to $50,000. Typically, these loans are unsecured, meaning that the borrower does not need to provide collateral.
How to Apply for a Bad Credit Loan
The first step is to find a lender that offers bad credit loans. Although these lenders charge high-interest rates, borrowers are more likely to get approved. Before applying, borrowers are also advised to look closely at their credit scores and credit report.
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Federal laws allow individuals to maintain a copy of their yearly credit report from credit reporting bureaus. With the report in hand, one can identify errors on their record and correct them before applying for a loan.
Borrowers also have to ensure they can repay the loan in time. Defaulting on the loan can only worsen their credit score.
Typically, the bad credit loan providers check the borrower’s credit score. Therefore, it is essential to check the lender’s policy first to see whether you can get prequalified.
The lender typically requires borrowers to provide financial documents to complete the application.
Therefore, it is essential to gather the relevant documents before applying for the loan. Depending on the lender, borrowers may need to provide:
- Contact information, including address and phone number
- A government-issued ID
- Proof of income
Payday Loans
Payday loans are personal loans scheduled to be repaid by the borrower’s next payday. Generally, these loans total $500 or less. Since payday loans are often a lost option for borrowers with poor credit, they typically carry a high-interest rate.
How Payday Loans Work
Borrowers can access payday loans by visiting the lender’s physical location or filling out an online application. Typically, lenders conduct credit checks to determine the loan terms and rates. However, like bad credit loans, credit scores don’t significantly affect the borrower’s prequalification for payday loans.
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This implies that borrowers can access payday loans despite poor credit ratings.
The borrower can clear the payday loan before the due date. Borrowers can issue a post-dated check to the lender or authorize the lender to deduct the loan amount from their bank accounts directly on payday.
Bad Credit Loans vs. Payday Loans
Bad credit loans and payday loans have similarities but are different. Both are unsecured loans, meaning one doesn’t need to provide a title or something to back the loan as collateral. Here are some of the most significant differences between payday loans and bad credit terms:
- Loan Amounts
Payday loan lenders offer loans at a smaller amount- typically under $500. On the other hand, borrowers can secure high amounts with bad credit loans
- Payment
Depending on the type of loan and the lender, bad credit can be paid monthly. The loan’s due date is set on the lender’s payday.
- Borrowing Terms
Bad credit loans can last for up to a year. However, payday loans have shorter terms. Typically, borrowers may have to consider repaying the loan a few weeks after borrowing the loan.
Payday Loans with Bad Credit
Most payday lenders understand that borrowers may not have the best credit scores. Instead, the lenders make up for the risk by charging more fees and high-interest rates. If the lender performs a hard credit check, the borrower may temporarily notice the effect on their credit score.
It is essential to understand that if the check bounces or the borrower can’t pay the total amount, the loan amount could be sent to collection agencies. This can ultimately impact the borrower’s credit score.
Apply for Payday Loan with A Bad Credit Today!
Mypaydayloans.com understands that unexpected expenses can occur at any time. They will offer a solution for you whether you have a good credit history or not. Fill out an online application, get approved within minutes, and have funds deposited to your account within a business day.