Is a Payday Loan the Best Option if I have a Poor Credit Rating?

If you need to borrow money and you have a poor credit rating then you could certainly be limited in the options that you have. You may find that many conventional ways of lending ill not be available to you. It is worth looking at all of your options as well as payday loans, though as there may be others available that will work for you.

Conventional lending

Make a start by finding out whether there might be some conventional lending methods available to you. Applying for loans is not the most sensible idea as every turned down application will show up on your credit report. However, you could talk to lenders about whether they think that they would be likely to accept you or not. This could be asked anonymously over the phone and then they will do not credit check and it will therefore not show on your credit record. It is worth being aware though, that if you borrow money and you do not have a good credit record then you will be seen as a high risk. For borrowers with a high-risk, lenders will charge a higher interest rate. This means that you will be unlikely to get the advertised rate of interest but will be charged more.

Unauthorised overdraft

If you have a current account then you may be able to draw out cash or transfer money form the account that you do not have. Even if you have not arranged an overdraft with the bank you might be able to take money out this way. This is called an unauthorised overdraft and you will need to be careful as they are very expensive. An unauthorised overdraft can be one of the most expensive ways of borrowing. It will depend on the costs of the specific bank you are with as well as how long you have the overdraft for, but do be very careful if you are considering this route with regards to the costs.

Guarantor loan

A guarantor loan is a way that someone with a poor credit record can borrow money. They will have to find a guarantor, which is a person that will cover the cost of any repayments that they cannot make. This means they need a friend or family member that not only has a good credit record but will be prepared to help them out in this way. A guarantor loan can be for a few thousand pounds so can be useful if you need a significant amount of money. They are expensive though, as even though you have a guarantor there is a still a risk and there is also a cost to the lender of getting the money form the guarantor if the borrower does not manage to pay.

Payday loan
A payday loans can be arranged very quickly and there is no credit check which means that it is available to many people. It is probably the option that most people think of if they need to borrow some money if they have a poor credit rating. It can be a fairly expensive option, but if you have a bad credit rating then it is unlikely that there will be any options that you will be able to easily afford anyway. It is easy and quick which can make it stand out. However, you can only borrow a few hundred pounds or perhaps up to a thousand if you have had payday loans in the past and have paid them off when required.

So as you can see there are alternatives if you need to borrow money and have a poor credit rating to just a payday loan. They do differ though and some may not be available for everyone. However, it is still worth considering each option to see whether it might be a better one for you than a payday loan. There are advantages and disadvantages of each and which suits your needs better will depend on how much you want to borrow, how long you want to borrow it for and some more specific things like if you can find a guarantor, if you have a good enough credit record to use conventional borrowing etc. It will very much be a personal decision but it is worth realising that there might be options out there and that it is worth looking around to find the best one for you.

It is also important to make sure that once you have decided on how you are borrowing that you compare different lenders to find the best one. They will vary in their cost as well as other features and so it is worth finding a bit out about them and then you will know that you can choose the one that is the best for you.

Should I use a Payday Loan to Buy Birthday Gifts?

Buying gifts for anyone, whether it is a friend or family member can be really great fun. It can feel great to give them something special and to make them happy as well as show them how much you care about them by giving them a gift. However, it can be expensive to buy gifts and if you are short of money then you may need to borrow money in order to afford them. You may consider taking a payday loan out to pay for them. It is worth checking out all of your options though, to make sure that you pick the best one for you.

Save up or use savings

If you have time, then you might be able to put a bit of money aside and then be able to afford a present without borrowing money. Maybe taking a note of when birthdays are and trying to schedule your savings around that will help. If you already have savings then using these instead of borrowing is usually best. It tends to be cheaper to forgo the interest that you would get on the savings to avoid paying it on the loan. This is because loan costs are normal higher than the interest you get on savings. However, this is not always the case so it is well worth checking.

Compare different loan types

If you are thinking about getting a loan, then compare all the loan types first. You may assume that if you need something quickly or if you have a poor credit record then a payday loan is your only choice. However, there may be other options available and you should look at them to check before you go for a certain type. This is because you may find that there are cheaper alternatives or other loans that will give you a repayment plan that suits you better or it is with a lender that you would prefer to go with.  It should not take too long to do this and you might be surprised at what you can find.

Have a no present pact

It could be worth talking to the person about having an agreement to no longer exchange gifts. This might be a difficult subject to bring up but it could be a huge relief to them as they may be having the same struggle as well. They might be happy to stop exchanging gifts altogether or they might prefer to just not do it for a little while to give you a chance to be in a better financial position. It can feel mean, but if they care about you, they will not want you to struggle financially just to buy them a gift. In fact, they may feel guilty when you buy them gifts because they know that it is costing you money that you should really be spending on necessities. It can be difficult for people who like giving gifts to realise that some people do not like receiving them. However, they can be an embarrassment or awkwardness, not just because the person is spending more than you know they can afford but also because perhaps the gifts are not appropriate. It could even be that they cannot afford to spend as much in returning the favour so they feel sad. Obviously you may not be able to suggest this to everyone, particularly any young children that you have, but you could cut down what they have or be very careful with your budget.

Delay buying until you can afford it
Another solution could be that you delay buying them a gift until you can afford it. You could explain to them that you will have to wait before getting them their gift. If you do not want to explain why but feel you should tell them something you could always indicate that you wanted to wait for something to come back into stock or that you had ordered it and it was taking longer than you expected. You may not enjoy lying though and may prefer to be honest or to not give an explanation.

So there might be alternatives to the payday loan which could help you to avoid borrowing money. Loans like a payday loan should really only be used in emergencies anyway. That is what they are designed for and so using them for things like gifts is not really their purpose. All loans are expensive and so you should really think hard before getting them out. You will have to repay them and pay costs and/or interest on top and so it will mean that anything you do buy with the money you have borrowed, will be more expensive as a result. So, it is always worth thinking really hard about whether borrowing money is going to be the right decision or whether it will be a decision that you will regret.