A number of Canadian citizens struggle to find a loan that is low interest and has high benefits. One thing that can ensure that you find such a deal is a good credit score. However, many people suffer from bad credit histories.
In such scenarios, people are looking for instant solutions that will improve their credit score in no time. Rumors state that payday loans can be a solution for such a scenario.
Is it true? Keep reading to find out.
How quickly can you improve your credit score
Improving your credit score can be either very easy or a very long and hard process. It all depends on how bad the situation is. Of course, if your credit score is in a big trouble, it would require a lot of efforts.
Technically, the only thing that improves the credit score is when you pay your payments on time. If you continue with this habit, the credit score improves automatically. However, the issue here is that we are short on time and need a better score immediately.
What does a payday loan do
Payday loans have become one of the most commonly opted options for debt in Canada. The reason behind this has little to do with people’s loan needs and more with their effort to improve their credit score. What people do is that they get a payday loan and then payback on time. It sounds basic but since the rules of credit scores are not very strict, it does help bring the credit score up positively.
Yes, when this payday loan is taken, it does become a part of the credit history. Your credit file will give all details regarding the loan, including your regular payments. The loophole that allows you to get away with this very basic technique is the fact that your credit score only mentions that you paid back a loan on time, not that it was a payday loan.
Although this loophole does bring benefit in the short-term, it can slightly negatively affect you in the future. Eventually, lenders will find out that this loan is actually a payday loan and your technique will all come out of the shadow.
Is it worth doing?
When you look at it, getting a payday loan and instantly making the payments does bring you benefit. However, it is really worth it?
The truth is payday loans are very expensive. They are above 4000% excluding APR! With such a high-interest rate, anything can go wrong and you may end up having to pay a huge amount for nothing.
Although when you decide to pay back the loan immediately, you do have to pay minimal interest and the overall amount is not too high. However, you never know. There could be an unexpected delay in the payments. What most people do not understand in the beginning is that delays can increase your payment amount a lot. Do not get yourself into such situations where you will have to learn such things the hard way.
Getting a payday loan and paying it back is not an illegal practice. There is no fraud or any sort of breaking the rules. However, it is a tricky thing to do. While some people have got around it, we do not recommend using this method if there is the slightest chance of delay in the payments.
Try to stick with the easy route even if it takes up a long time. However, if you have a critical financial situation, go ahead and take the risk.