PayDay Loans - I used one responsibly, and didn't get stung!!!

Derivative

esuhl wrote: »

Of course -- if you have £10M in savings and income of £600k/yr then a payday loan is hardly going to affect your credit rating. But if you're on a low income with no savings, a mortage lender might consider your usage of payday loans to indicate poor money management or your lack of other solvent funds and therefore more risk. A loan company might see that as as profitable and less risky. (I don't know - just a logical guess).

I think you're getting a bit carried away here. With £10m in savings it is fairly unlikely that you would need to take out a mortgage. On low income with no savings, you would have no chance due to lack of deposit, and depending on what you mean by "low income", you might not be in a position to even make interest payments, making the credit rating rather irrelevant.

The interesting case is inbetween. I would wager that defaults would affect a lender's decision far more than simply taking out and paying loans. Then again, if I were a mortgage lender, I would probably decline those who had taken out PDL's at least in the last year or two. It is quite obvious that this person has not had their finances in order in the recent past.

I'd argue that a credit card is also "necessary". It can act as a "buffer" -- it's better to have a short-term credit card debt than an unauthorised overdraft or a payday loan. It's usually cheaper to spend abroad on a credit card than a debit card. As you said, it may also give someone a better credit rating which can be useful to get a mortgage. And you get better protection when buying goods over a certain value.

A credit card can be helpful if you pay it off in full every month. It is not 'necessary' by any means. Save money for an emergency fund and then you won't have to take out a loan because the money is yours to spend.

Not to mention the fact that if you are in a position whereby you'd need a credit card "in an emergency" you are not in a position to be going abroad anyway, unless for business.

I understand that having a decent credit file is important, but what I can't get my head around is people seemingly agonising over details. Just make sensible financial decisions, only borrow what you can afford to repay, and you're golden.

esuhl

EdgEy wrote: »

A credit card can be helpful if you pay it off in full every month. It is not 'necessary' by any means. Save money for an emergency fund and then you won't have to take out a loan because the money is yours to spend.

And a mortgage isn't necessary either. Save the money then buy a house - simple. The only thing is that it can work out more expensive due to money spent on rent in the meantime.

It's exactly the same with a credit card. You could just save up for everything you need to buy and make online purchases with a debit card... But that can work out more expensive if you end up greater paying international purchase charges or if a vendor goes into administration before you receive the goods.

Neither a mortgage nor credit card are in any way necessary, but both can help you save money.

Derivative

esuhl wrote: »

And a mortgage isn't necessary either. Save the money then buy a house - simple. The only thing is that it can work out more expensive due to money spent on rent in the meantime.

Indeed. My only reason for taking out a mortgage would be if the interest payments were in the same ballpark as renting. It can be more complex than that of course due to interest rate and rent rises, but I understand the reasoning.

It's exactly the same with a credit card. You could just save up for everything you need to buy and make online purchases with a debit card... But that can work out more expensive if you end up greater paying international purchase charges or if a vendor goes into administration before you receive the goods.

Also entirely correct.

The difficulty I'm having is not with recognising the value of a credit card or mortgage - of course they're useful. I'm not sure I can really agree that a credit card is essential as I'd argue that buying internationally shipped goods isn't, but that's a semantical issue.

My point is this - if you budget sensibly and are reasonably financially literate, credit rating is not something you need to worry about. Pay day loans do not present an issue (wrt rating), because a sensible person would never have the need for such.

Yet if you're not budgetting sensibly and have taken out pay day loans in the recent past, I feel that credit rating is the least of your worries. Of course it would be great to pick up an 0% CC and transfer everything onto it, but that's unrealistic. I'd be focusing on things that matter, like the weekly budget and saving emergency funds, where you can get the best rate, etc, not lining up avenues to borrow more.

Basically - it's like worrying that the scratch on the hood of your car might stop you selling it, when the front wheels fell off last Tuesday.

geoffky

OH DEAR ! next you will be telling me your local loanshark is great because you paid him back and he never kneecapped you...what a ridiculous thread

Monkeynut

I used Wonga once, a couple of years back to borrow £1 for 1 day!! I had a code that took the 'admin fee' (or whatever they call it) off, so I was literally only paying the interest. I think they took £1.01 or £1.10 back from me the next day!
Doing this through TopCashBack, or Quidco, can't remember which now, got me £35!! So I was £34.99 or £34.90 up. I would say that's a fairly good experience with them!!

I did think at the time, as I'd read plenty about how they damage your credit file, whether it was worth it, but I wouldn't be in a position to take out a mortgage for a good few years yet, I already have a credit card, which is usually clear, but means if something unexpected does come up I've got some emergency credit, and if I'm buying something expensive that we've saved and budgeted for, I use it for the added protection, then just pay it back.
That said though, I've never actually seen it show up at all on my credit file.

sharpy2010

Bare in mind it shows up on Experian, but not on Equifax.

Experian_company_representative

Many lenders who consult Experian for credit checks see payday loans as just loans, so the potential for adverse discrimination is low I think. However, as others have said, the effect of any data on credit decisions is always circumstantial and for most people repaying a tiny loan back on time is unlikely to have a significant effect on credit scoring. Probably more helpful if you're starting from scratch, credit history-wise.

James Jones

Apples2

It would be noce (sic!) to see a list of how each lender reports.

Some do indeed appear as a simple personal loan, others show as "Salary Advance" or similar.
The Salary Advance are the ones to avoid but to be fair, if the company involved is named, it isn't rocket science for them to identify the reason (also the term involved).

drjones

simondixon wrote: »

hi,

I think the rules are simple, if you cannot afford to borrow then DONT.

True, however, complicated by the fact that if you do need to use a PDL, then chances are you can't afford to borrow! :rotfl:

Ghostrider

Never had a problem with PDLs myself, in fact i've always found them very useful on the odd occasion i've called on their services in the past.

Rule is...if you can't afford to repay, then don't borrow it.