How Can Taking Out A Safe Payday Loan Affect Your Credit?

October 28, 2019 at 8:10 am by Shirley Mitchell | Posted in Financial Planning

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Anyone can find himself in a tough financial condition at times. At such situations people turn can look out for safe payday lenders. But be sure that like other loans, this one can also impact your credit score if you fail to abide by any conditions mentioned by the lenders.

Will Taking Out A Safe Payday Loan Directly Affect Your Credit Score?

If you are running short of money or need an urgent loan for car repair or medical expenses you can apply for a safe payday loan. If apply for a safe payday loan it will never likely impact your credit score. This is because most of the lenders of a storefront will not be running any credit check. If a person makes timely repayments for his availed payday loan, it would not be improving his credit score as most of the lenders of safe payday loans never report to the National Credit Bureaus. So if a borrower manages to repay the loan back in 2 weeks, it will not aid or even impact his credit score. But as most of the people make a plan of repaying a loan within the scheduled time, not having sufficient income, as well as other sudden costs, can stop many borrowers from repaying their loans on a scheduled time. If you default on a safe payday loan it can impact your credit score in a negative way. 

How Can A Safe Payday Loan Affect A Borrower’s Credit Score?

There s are some ways by which a safe payday loan can affect a borrower’s credit score. Few ways are mentioned below:

·Bounced Cheques: 

Most of the safe payday lenders will ask a borrower to write them a post-dated cheque that corresponds with the borrower’s next payday. If he does not maintain sufficient balance in his account when that scheduled date comes and the loan is not renewed, it typically results in bouncing of a cheque. If he is unable to repay the bounced cheque, your account can be closed by your bank and it will be sent to a collection agency. A collection agency can report such an incident to the credit bureaus. Or in other words, a safe payday loan needs that you give a cheque for the overall amount of the safe payday loan along with extra fees. The cheque will be held until your safe payday loan is due. Then the lender can cash out the cheque. If there is no fund in your bank account for covering the overall cheque amount, you will be ending up with a bounced cheque. Bounced cheques will never impact your credit directly. But if a cheque gets bounced and you do not repay it, the bank will send your account to collections. If the collection agency reports your issue to the credit bureaus it will impact your credit score in a negative way. 

  • Collection Agency:

     A safe payday lender can also send any debt of a borrower to collections if he is unable to keep up with his scheduled repayments. If a debt collection agency reports it to the national credit bureaus, it will affect your credit score negatively. If a lender of a safe payday is seen to file a lawsuit against a borrower and he fails to attend his court date or lose the case or do not pay the judgment, this reported information will be impacting your credit till seven years. 

  • Lawsuits:

     A safe payday lender or any collection agency can sure borrower for collecting unpaid loans along with fees. Taking a safe payday loan will not necessarily impact your credit score negatively, but the repercussions of a safe payday loan debt might. With almost most of the safe payday loans that are renewed or rolled over, it is quite obvious that the debt trap of a safe payday loan is real. For various people it leads to monthly repayments that are unmanageable and availing one safe payday loan after another for covering the increased interests as well as fees from the previous loans. Such a cycle will lead any people into different financial situations unfortunately where they will never be able to clear off their debt and it will result in some negative repercussions on a person’s credit. 

  • Other Loans:

    A safe payday loan can affect your credit score indirectly by making you a defaulter on any other loan or credit card. For instance, if you are unable to pay your student loan as you require to put the money on a safe payday loan, this will impact your credit score. A safe payday loan debt can look to be different from a standard personal loan or any credit card debt, they actually work similarly if you are unable to repay the borrowed money. The debt will be sent to collections and it will end up affecting your credit score negatively.

 

Shirley Mitchell

Welcome to SOE 2013, I am Shirley Mitchell. Financial Strength is the cornerstone of our success.

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