The Difference between Online payday loans and Traditional Loans
For immediate need that is below $500, and if you can repay it within 14 days to one month, payday loan online can help you a lot. However, if you need moneymore than that for longer-term, then consider the traditional loans. It is no secret to how conventional loan works. Some banks that offer traditional loans also offer shorter-term loans to payday borrowers.
They also differ in the interest rate. Payday loans onlinehave higher interest rates as compared to the traditional ones. In payday loans, the chances of getting rejected are low. Unlike conventional loans, your credit score should be impressive. If not, you will most likely get denied. Payday advances require less paperwork than the traditional way.
Payday advances are intended only for small personal, immediate needs. A traditional loan is usually for business and is suggested to help finance investment.
What is Payday Loans Bad Credit?
The payday loans bad credit are designed for those individuals with low credit scores and bad credit history. It is a short-term loan with a small lending amount of up to $1000. This loan is used to pay your unexpected bill like car repair or hospitalization. You have to pay the loaned amount on the next payday.
There have been changes in the regulation of lending individuals with bad credit. Some lenders are now offering high-cost installment loans up to 12 months.
The interest rates are not fixed as it varies from one lender to another.However, the amount should comply with the FCA or Financial Conduct Authority. This means that the lenders should not exceed beyond the designated amount that they can add on the amount borrowed.
Keep in mind that if you have a FICO score lower than 670, you are a good borrower. But if you have below 580, you belong to a very poor borrower.
Each lender has its criteria in approving and pricing loans. And because of this, it is hard to tell what APR you will be offered for a personal loan if you have bad credit. The interest rates may range from 5.5% to 36%. And if your credit rating is very poor, you will be offered rates on the higher end.
For bad credit personal loans, some creditors will offer no credit check or guaranteed approval cash advances. Be careful with these promises. A trustworthy lender will never provide such guarantees.
Is It a Good Idea to Apply for Online Payday Loans for Bad Credit
It is up to you whether you will take out a payday loan or not. To help you decide here, some of the advantages and disadvantages of getting online payday loansfor bad credit.
Advantages
The biggest advantage is that cash loans onlineare easy to get. The creditors usually do not check your credit history when deciding to lend you money. So having a bad credit score won’t stop you from availing the loan. Once approved, you will be able to get cash within the day.
When you get a payday loan and if you can’t repay it, then it won’t do any harm to your credit score.
You can get online loans by submitting all the documents. There is no need to visit a finance company or meet your loan officer several times.
Getting an unsecured loan is easy. You don’t need collateral, no need for checking account, the procedure is straightforward. First, you need to go to the lender’s website. Then fill up the application form with all the data required. Once approved, you get the money in instant directly on your bank account.
The online lenders allow even those with bad credit to apply for a loan. The requirements you need to complete are also minimal. You need to be 18 years old, or in some states 21 years old. Furthermore, you need a valid e-mail, a phone number, and a US passport. The most important thing when it comes to direct online lenders is that it should be a company with many years of experience and an excellent reputation.
Disadvantages
The biggest drawback of this type of cash advance is their high fees. Usually, the payments on the usual payday loans can be very high around 400% of APR as compared to credit cards, which is around the national average of 15%.
Whenever you get a payday loan, the interest amount is usually higher, and you need to pay it in the shortest duration. When you borrow the same amount on a credit card with a 15% APR and pay it in 12 monthly increments, it will cost you around $41.55. However, in credit cards, you may tend to pay it longer.Thus, sometimes, you are paying more than what you have borrowed.
And because people sometimes cannot afford to repay the principal amount, they get trapped in a cycle of debt, which may last for several months.
Safe Online Payday Loans - How to Protect Yourself from Bogus Lender?
When borrowing money online, you can lose money or pay too much if you get cash from unreliable lenders. To make sure you are protected against these bogus lenders, you should remember some tips.
Check the US Consumer Financial Protection Bureau (CFPB) for complaints. CFPB keeps a database of complaints concerning financial products. The complaints are posted online for 15 days.
You can ask referrals from your relatives, friends, and financial influencers.
Stay away from companies with upfront fees, approval assurance, requesting money by wire or Western Union, unprofessional services, unlicensed lenders, and others.
Be a responsible borrower. Borrow only the amount that you can afford to repay. Don’t be tempted by what the lenders might offer you.
