Payday loans seems to be in a category of their own when it comes to talking about loans and other types of credit. Traditionally, credit has been given out with the intention of paying back what has been borrowed, over a determined amount of time.
Repayment terms for mortgages and car loans can last over a period of years. Personal loans from traditional lending institutions can be spread out over a long period of time. Credit cards are often open ended with payoff based on what the borrower pays off each month. Although interest rates, loan terms, and payment amount may be different, all of these types of "credit" have one thing in common: if the borrow is responsible in repaying their debt, they will increase they credit standing and acquire purchasing power for their future financial endeavors.
Payday, cash advance, car and auto title loans, and the newest "installment Loans" have all come onto the credit scene in the last few decades offering consumers a different type of borrowing option; one that is easier to obtain, faster to pay off, and doesn't deal with any type of credit score or standing.
Borrowers like these types of loans because they are fast and simple, can be applied for online or at a storefront, and don't required the dreaded credit history check that so many consumer these days want to avoid.
Getting a loan to cover emergency costs, pay for long awaited medical bills, or bridge the gap between paychecks is easier than ever due to the amount of lenders out there willing to give these high risk loans. Yes, high risk because the lender is willing to loan money based solely on the employment and income of the applicant. Most payday loan lenders will not even look at your credit history as an indicator of whether or not the borrower will make good on his payments.
The ease of getting a no credit check payday loan with fast funding is probably one of the driving forces behind this lending industry seeing a tremendous rise in the amount of loans being taken out with the rough economy. With seventy-six percent of borrowers "re-loaning", meaning taking out another loan once they have paid of their initial loan, these short-term financial fixes give the un-bankable a way to put cash in their wallet.
But with a no credit check policy comes the fact that if a borrower does make good on his loan, he won't reap the benefits of having his credit score boosted into the proverbial good standing category. For the most part, payday loan lenders, like car title loan lenders, are there to provide fast cash loans. They are not the type of credit you want to use if you are looking to improve your credit score.
