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Facts About Payday Loans And Credit Score
Everybody knows that payday loans and cash advance loans are probably two of the few financial products that do not require credit verifications to qualify for them. Though credit has little to do with the qualification process of payday loans and cash advance loans, there are still interactions between these loan products and your credit score and history. It is very important to know them if you are interested in keeping a healthy financial life.
These interactions may have nothing to do with approval but have implications on the qualification process of other financial products like credit cards, personal loans and even secured loans like home mortgage loans or home equity loans. So, as you can see, it is important for you to know them because your future financial life can depend on the use you give to these loans and their relation with your credit score.
Positive Interaction For Raising Credit Score
It may sound strange but even though payday loans are meant only for an emergency situation, they can be a great tool for recovering your credit if used properly. Since most of the lenders that provide this kind of loans report to all major credit bureaus, it is possible to obtain one of these loans that do not require credit checks and take advantage of the fact that the lenders report to credit bureaus to get positive inputs on your credit history.
Even though the approval of the loan will not have implications on your credit report because no credit checks are made, the timely repayment of the loan will be recorded into your credit history and thus, a positive entry will be added to your credit report. However, bear in mind that payday loans do not have long repayment programs and thus, a single or two entries will be reported during the repayment of a payday loan. Personal loans with longer repayment programs are far better for this purpose, however, you may need to request a few payday loans before you can get approved for a personal loan if your credit score is not that good.
Negative Effects On Credit Score
There are some reasons why payday loans can affect credit score negatively. The mere fact of getting a payday loan will not affect your credit score but if debt keeps accumulating it will affect your debt to income ratio which will, in turn, affect your credit negatively. Thus, you should avoid using payday loans as a common source of financing because that is the main reason why debt accumulates: people fail to raise the money to repay a loan and so, they take another loan to repay the previous one.
Also, payday loan lenders report to credit bureaus, as explained above, and if the timely repayment of the loan gets recorded into your credit report as a positive entry, the lack of payment, or late payment will also be recorded into your credit report but it will affect your credit score negatively. As you can see, just applying for a payday loan will not affect your credit but what you do with it and how you repay it can have either positive or negative effects. Thus, be careful.
Fixed Home Loans
Home is one of the basic necessities of life for every individual. People do all sorts of things to buy a home like working extra hard, doing overtime in offices, taking up part time jobs in their free time, and so on. However, not all are lucky enough to own a home with their limited incomes. But, in order to fulfill their dream of buying a home, people take loans from banks or other agencies. These days fixed home loans are becoming popular throughout the world.
The first and foremost thing that comes into the mind of a home loan seeking person is the interest rate. Some loan seekers often get confused between fixed interest rate and floating interest rate. Let us try to understand the difference between the two. In case of a fixed home loan, the rate of interest remains fixed for the entire loan period. For example, if you take a home loan at 7% per annum for a period of 25 years, this interest rate will not change during entire 25 years. Whereas floating rates are directly proportional to the interest rate prevailing in the market. In other words, they keep on changing as per the market interest rate. People normally prefer fixed home loans due to the security provided by it. A fixed interest rate loan is suitable for persons with limited and fixed monthly income. However, the only drawback associated with it is that if interest rate comes down, the borrower still has to pay the same interest that was applicable at the time of taking the loan.
Further, in countries like Australia, where the mortgage interest rates are continuously showing an upward trend, people are finding fixed home loans more attractive and appropriate. This is because Australians consider things such as budgeting, lifestyle, economic instability, and changing interest rates, before going for a loan. With fixed loan, people know how much they have to pay each month and can plan their budget accordingly. While in floating loan, they become totally dependent on the ever changing interest rates and cannot do their financial planning in an efficient manner.
Some other benefits of fixed loan include peace of mind for future financial planning, lower interest rate than other type of loans, and surety about repayable amount. With each passing day, more and more people are turning to fixed term loans as it is a safe and secure option.
So, if you have finally decided to take a home loan, compare the interest rates of all types of loans. You can do this research by browsing different websites that specialize in home loans. You can also search the Websites of various government and private banks and compare the terms and conditions offered by them. Do not take hasty decision in this matter as it can affect your life and future planning in a big way. Whether this will be a negative affect or a positive affect, depends on how wisely you choose your loan.