Payday Loans – Pros and Cons: Suitable for Those with Bad Credit, Adverse Credit and CCJs

Payday loans are a source of short term, unsecured borrowing. They allow a UK citizen to borrow up to £750 and receive the money very quickly, usually on the same day. An applicant will need to prove that they are 18 years old, have a bank account and are in full time employment.

No credit checks are performed so they appeal to people with: bad credit, adverse credit, County Court Judgments or CCJs, defaults and bankruptcy. A payday loan helps to fill a short term hole in personal finances. The rate of interest charged reflects the risk of default posed to the lender.

Advantages of Payday Loans

  • Speed of availability. A Payday loan can usually be approved and payment received on the same day, subject to the provision of qualifying paperwork.
  • No credit check. It is possible for those with: bad credit, adverse credit, County Court Judgments or CCJ’s, defaults and bankruptcy to get a Payday loan.
  • A Payday loan can be used for any purpose. No restrictions exist in terms of what the money borrowed can be used for.
  • Helps prevent late rent and mortgage payments. Late payment can result in bad credit or adverse credit so paying on time is important. In certain situations, it can prevent eviction or repossession from happening.

Disadvantages of Payday Loans

  • High rate of APR. Interest rates are extremely high and border upon being usury. A Payday loan represents the most expensive form of borrowing on the market, but it is sustainable provided the money is repaid within the agreed timeframe.
  • Paying bills next month. If struggling to make the repayments this month, it will become even more difficult to make any repayments the month after. The interest paid on the Payday loan will leave less disposable income, although this could be overcome by working additional overtime.
  • Uncertainty. If a fresh emergency happens it can be difficult to find the money to repay the Payday loan on time. This can result in adverse credit or bad credit, making it difficult to secure further credit in the future. Adverse credit stays on a credit report for a period of 6 years.
  • Provides only a short term financial solution. The usury rate of APR means that a Payday loan is only realistically a short term source of borrowing.

Chris Tapp of the “he Donal MacIntyre programme stated that, “We would only ever want to see people using payday loans if they have a desperate, one off short-term need and there is absolutely no other option.”

A payday loan provides a potential lifeline for someone struggling to pay the rent or mortgage. Whether it should be used to pay for a vacation is arguable. Check all other sources, such as borrowing from family or friends, before opting for a payday loan. If a payday loan is taken out, make sure that it is paid off punctually and in full.