If you have filed for bankruptcy, your credit will be so damaged that you will not be able to qualify for virtually any form of loan. There is one exception to this though: payday loans. A payday loan is a small, short-term loan which is usually given by an lending independent company (as opposed to a bank). Because payday loans are given against your next paycheck, you will generally only need to show proof of employment to get the loan. Many payday lenders don’t even look at your credit history before issuing small loans so your past reputation as a bad borrower will not likely affect whether you can get a payday loan or not. In some cases, a payday loan can actually help you rebuild your credit.
A payday loan is considered a loan by the same standards as a mortgage, student loan or car payment. Your repayment of a payday loan will get reported to the credit bureaus just like with these other loans. If you pay off your payday loan on time, then it will improve your credit score. Do note, however, that a payday loan is not going to carry the same weight as paying off another type of loan, such as a mortgage. This is because older loans (ones which last for long periods of time) are a better indicator of your ability to responsibly pay off debt on a regular basis. A few payday loans are probably not going to get your destroyed credit score anywhere near the level needed to qualify for most loans, but every little bit can help after filing for bankruptcy.
Contrary to common belief, taking out a payday loan will not adversely affect your credit history. What happens after you get a payday loan can have an effect on your credit score though – including making your already poor credit even worse.
Payday loans are notorious for having very high interest rates as well as fees. For people who have a history of bankruptcy from failure to pay off debts, taking out a payday loan can be especially risky. Before you put yourself in a situation where you could get into more debt, always make sure that you really need the loan and that there are no other options available to avoid more debt.
Be especially cautious if you are going to take out payday loan to pay off other debts. In most cases, this is a very bad idea because the interest on the payday loan will take a quick toll, as will any late fees. You should carefully calculate the costs of the payday loan and determine whether they are practical for your situation. For example, if you have a final notice bill for your electricity and it will cost you $100 to turn the electric back on, then the fees for a payday loan may be worth it because they are less than $100.
As with any loan, you should always make a budget plan before taking out a payday loan. Be sure you can return the amount in full on payday or your credit score will suffer even more.