How to get payday loans with a bad credit score may seem difficult, but it is not impossible. There are times when we’re all faced with a bill we didn’t expect; from a broken-down car to an emergency medical expense. Getting your hands on some extra money could always help, and everybody has been in the same position at some point.
However, if at the point of having that need, your credit score is in a poor state, your chances of getting loans in Nigeria with friendly repayment terms are greatly limited.
For those who struggle with a poor credit history, borrowing money can be harder than for people who have a more positive credit record, but that does not mean that applying for a loan has to be difficult.
What is a bad credit score?
A bad credit payday loan is a high-cost, short-term credit solution that is specifically designed for borrowers who have a poor credit history. Today, payday loans for people with bad credit often refer to loans where repayments are stretched out over several months, but that still come with significant interest rates which can add up to a fairly expensive total repayment sum.
Payday loans were a common form of borrowing that became the subject of particularly bad press during the mid-2000s. They were designed to be a short-term solution that was paid back when the borrower was next paid by their employer. Nowadays, the term is more frequently used to reference short-term credit that comes with high levels of interest attached.
What causes a bad credit rating?
Having a bad or poor credit rating usually means that there are negative features in your credit history that indicate to lenders that you could be a risky borrower.
Your credit score is the product of many factors, and some that can cause a person to have poor history include high debt balances, recent bankruptcy or other insolvency solutions, or a history of late payments or defaults on outstanding debts.
Although a ‘bad’ credit score could be the result of financial mistakes you made in the past, it could also be that you simply haven’t taken out enough credit over time for credit agencies to build up a picture of your borrowing habits.
Poor credit history is something that can be improved upon, but it won’t necessarily prevent you from accessing credit when you need it.
What is a payday loan?
A payday loan is a type of short-term borrowing where a lender will extend high-interest credit based on your income. Its principal is typically a portion of your next paycheck. Payday loans charge high-interest rates for short-term immediate credit. They are also called cash advance loans or check advance loans.
Payday loans are typically based on how much you earn, and you usually have to provide proof of earnings when applying for one.
Payday loans in Nigeria mostly do not require any collateral, making them a type of unsecured personal loan.
Interest on Payday loans in Nigeria is high because lenders take on a lot of risks. They usually don’t check your ability to pay back the loan. They may also charge high fees if you miss your repayments.
This can be dangerous, especially for borrowers with poor credit as failure to pay may likely plunge you into more debt, thereby further damaging your credit score
Can you get a loan in Nigeria with a bad credit rating?
If you are struggling with a poor credit score and also need to take a loan, payday loans are your best bet.
Many lenders in Nigeria are willing to work with borrowers who have a poor credit history. While you may therefore be able to get a payday loan with a bad credit rating, that doesn’t necessarily mean that doing so is the best decision, as it can be expensive, and failing to pay what you owe on time can be even more detrimental to your credit score.
Your credit score is important to many direct lenders, what also matters is whether or not your current personal and financial circumstances will realistically allow you to repay what you owe in full and on time.
Will applying for a payday loan have an impact on my credit score?
Making an application for a payday loan could impact your credit score, but unfortunately, things aren’t quite that simple.
All authorised and regulated lenders in Nigeria are required to conduct credit checks on applicants as part of their affordability checks and the results can influence their lending decisions.
Bad credit applicants might start to run into trouble if they make multiple applications to various lenders as a result of being rejected. This is because each full (or ‘hard’) credit check will leave a marker on the applicant’s credit record which could be damaging to their rating.
Basic Requirements for Payday Loans
Going by the Nigerian government’s regulation, to qualify for a loan, payday lenders only require that borrowers:
- Be at least 18 years old
- Have an active account
- Provide some proof of income
- Provide valid identification
- Have proof of residence
Some payday lenders in Nigeria also require the borrower to have evidence of paying a utility bill. This can also be used as proof of residence.
Most payday loans in Nigeria get approved in as few as 15 minutes.
Where to get payday loans in Nigeria
Getting a payday loan in Nigeria is as easy as can be as most loan apps and traditional banks have made the process seamless.
In most cases, from application to disbursal, borrowers do not need to show up at a physical location or provide any paper documentation.
They also do not need any form of collateral to access the loan.
The process for obtaining a loan includes, but is not limited to;
- Downloading the app
- Filling out the application and providing the required documentation
- Submitting and waiting for a loan decision from the lender.
The entire process could take anything from five to 15 minutes. First-time borrowers are sometimes asked to pay something called a processing fee.
Some of the platforms where you can get a payday loan despite your bad credit score include;
- Alat by Wema Bank
- Aella Credit
Steps to improving your bad credit score
To avoid situations where you need urgent cash but are hindered by bad credit, there are steps you can take to improve your score.
Another thing to stress is that a bad credit rating might not be a result of poor financial choices. Sometimes, the lack of credit activities may reduce your credit rating.
It’s possible to improve your credit scores by following a few simple steps.
Take credit builder loans
A credit builder loan is a unique way to help you build or rebuild your access to finance through your credit score, regardless of your credit history.
Don’t miss payments
It goes without saying that your payment history is one of the most important factors in determining your credit score. Having a long history of on-time payments can help you achieve excellent credit scores.
Opt for Less than 30% Credit Utilization
The credit utilization rule of thumb states that consumers should aim to use 30% or less of their available credit to maintain a healthy credit score.
Avoid taking multiple loans
While some loans in Nigeria like quick loans or payday loans are good for building credit, taking out multiple loans at the same time may hurt your credit.