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Payday lenders - potentially damage your chances of other loans

When seemingly good credit is actually bad... in current cost of living crisis it may seem insensitive to write this but the purpose is to inform that if you're of the *ahem* younger generation you may not understand the background of these lenders and what their impact may be as we are seeing a rise in their popularity even among clients who have savings and clearly don't need it for the cashflow reasons they imply.

Quick access credit, credit that is approved and funded within hours, and for small value – like a $2,000 credit facility

Formerly we would call these “payday lenders”, lenders who would have cashed your pay cheque and given you the money without waiting for it to clear. As the name suggests its accessing your pay in advance, and it implies you have no spare cash, not even enough to wait until your “cheque” has cleared.

Noting these are quite different from the “buy now, pay later” loans aligned with particular purchases – which have their own bias for lenders.

In 2023, the result is

· your pay being advanced before you earn it.

· Or it's small dollar loans against items you own (pawn broking)

· Or other quick access emergency money

All of which gives a lender the impression that maybe you are struggling, or not managing your money well. Ironically the clients we are seeing using these aren't experiencing the cashflow issues they help.

Which gives them no comfort to give you a loan for anything important (despite the fact that it just may improve your position – remember he with the money sets the rules).

So what could this mean for you? It could mean lenders refusing to even consider you for a home or car loan –

· Sometimes when you have even an enquiry on your credit history from these lenders

· Definitely if you have active credit with one of these it will impact your ability to buy a home or a car.

Its possibly a little unfair given that the history of these loans is not well known, I’m not sure our younger generations understand where they originate and then can draw the line – it’s simply seen as “easy” to get when they need some cash without fully understanding the implications.

Hence writing this…really.


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