Payday Loans and Your Credit Scores – Episode #30

June 17, 2008 by  
Filed under Episodes

Payday loans and your Credit Scores.

First, do payday impact your credit scores?  I depends on how the payday loan company reports to the credit bureaus. You will have to ask the payday loan provider if they report payment status or inquiry information.

Are payday loans ever a good idea? At APR rates near the 300% mark, I hope there’s never a good reason to get a payday loan. If you need a payday loan, you might be near the credit score breaking point, and that’s when a credit counselor can help. I want to reiterate that payday loans are for emergency use only. And let’s define an emergency. The reason they are called or marketing as PayDay loans is that the intent was to give you cash flow until your next payday. But, people use them for kinds of purposes now. You should try many other resources first:

  1. Peer to peer lending like Prosper.com, LendingClub.com or Loanio.com
  2. Personal loans from your bank.  It’s worth looking into.
  3. Family loans or “gifts” to help you through a tough time. Many people go to payday loan places because they are too embarrassed to ask for help. This is a sign of denial about your situation.
  4. Friends. normally I hate borrowing from friends but it’s better than a payday loan
  5. Credit cards. You’ve probably done this already if you need a payday loan but credit card debt or credit card cash advances are far cheaper with the worst rates in the 25% range.

I can remember when payday loan places were these basic establishments in urban areas when I was a kid. Funny, now you see them in nice suburbs and the storefronts look pretty nice. There is a reason that they got fancier. These places are very profitable.

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