Are you going through a financial emergency? Have you exhausted your savings and are frustrated because your financial situation cannot wait until your next paycheck? You are not alone. According to a report by the Federal Reserve Survey, about 61% of Americans cannot pay a bill of $400 if it happens unexpectedly. This is the main reason why many Americans turn to payday loans companies for help to sort out short-term emergencies. Check out Chron for more information on how to successfully apply for payday loans of up to $5000.
If used prudently, payday loans can help you cover emergency expenses until you get your next paycheck. For example, if you need to purchase plane tickets for a medical trip overseas, you can always borrow money against your next paycheck for a price. Payday loans are short-term borrowings that often come with hefty interest rates and therefore, only go this route if you have exhausted all other forms of credit available.
Can An Online Payday Loan Hurt Your Credit Score?
If you are thinking about taking an online payday loan, start by doing your research. Take time to google and read everything you need to know so that you can make an informed decision. However, one important thing you need to know is that your payday loan will not be listed on your credit report. This is because most online payday lenders do not carry out credit checks on applicants when giving them loans and therefore, payday loans will not be reported to the three national credit reporting companies.
Ideally, you should make sure that you pay your loan during the agreed time. Rolling over the debt after your repayment period has elapsed will only magnify your problems. Since payday loans come with very prohibitive costs, going delinquent will result in accrued interest charges that can amount to thousands of dollars.
When you fall behind payments for a long time, the lenders can opt to sell your payday loan to a debt collector or a third-party agency. When this happens, the debt reporter will most likely report your bad debt to the credit reporting agency and this information will appear on your credit report and sink your credit score.
Some online payday lenders choose to deal with clients who flee from paying their loans by taking them to court. If this happens and the payday lender wins the lawsuit, the judgment will be filed. Some credit reporting companies will list these judgments in the public section of your credit report and it will stay there for about seven years from the time it was filed. Unpaid payday loans can damage your credit score immensely and limit you from getting short-term loans from other lenders.
Are There Options for Paying Your Payday Loans to Avoid Hurting Your Credit Score?
Now that you understand the consequences of falling behind your payday loan repayments, it is very important to prioritize paying your loan on time before it starts showing on your credit report. If you are in a financial crisis, which may be the main reason why you took the payday loan in the first place, there are several methods you can apply to ensure that you pay your loan on time. Here are 3 ways you can consider when looking to pay your loan
- Ask For an Extended Payment Plan (EPP)
In America, many states will require payday lenders to give extended payment plans to borrowers without penalties. If your lender is a member of the Community Financial Services Association of America, they can pledge to offer EPPs to you if you are really struggling to pay your loan. Ask your lender if this option is available to you.
- Sell Property That You Do Not Currently Need or Bring Extra Income
Do you have furniture or a used car in your yard that you do not currently need? You can sell it and use the proceeds to pay off the amount you owe. If you have no property to sell, however, you can get a part-time job such as babysitting, dog walking, or become a driver for some time to generate some income to pay your loan.
- Analyze Your Budget
Are there things in your budget that you can eliminate albeit temporarily? Do so and use all those savings to clear your debt. For example, you can opt to make meals at home instead of eating out, cancel unused subscriptions, buy second-hand clothes and reduce your utility bills. If you have close family or friends that you can borrow money from, approach them and request a short-term loan. Use that money to pay off the loan and then pay off your relatives as agreed.