Payday loans typically don’t improve your credit score, even if paid back fully and on time. While your credit score won’t be harmed if you pay a payday loan back in full, a lender can sell your debt to a debt collection agency if you fail to make payments. If the debt collection agency reports this to a credit bureau, your credit score may go down.
It is possible to be denied for a payday loan. Lenders generally don’t look into your credit when determining if they will lend to you, however, they will look into your employment history. They want to be sure that you will have a paycheck coming on the agreed-upon due date.
Payday loans come with risks that should be looked at carefully before deciding if one is right for you. High costs and short payback times make it easy to fall into a cycle of debt if you can’t repay your loan on time. The high fees can start to compound and quickly grow out of control.
Payday loans can be hard to pay back due to the high interest rates and fees. These loans are also paid back in full and generally don’t have a long repayment period. Only having two to four weeks to obtain the funds to pay back the loan can be challenging.
