Are payday loans used only by indebted people?

Sometimes you can hear that payday loans are only for heavily indebted people, and if we earn well, we should only go to banks, i.e. institutions that still enjoy some public trust. But how is

Sometimes you can hear that payday loans are only for heavily indebted people, and if we earn well, we should only go to banks, i.e. institutions that still enjoy some public trust. But how is it? Are payday loans only used by indebted people or do they have much wider applications than one might assume?

What are payday loans characterized by?

Payday loans are a specific type of loan that most, if not all, Polish loan companies offer. The amount that can be borrowed under them may range from several hundred zlotys to even several thousand. The repayment period can be very diverse – you can meet payday loans that must be repaid in just 7 or 14 days, but also those for which the borrower has 30, 60, or even 90 days to pay off.

Although some loan companies have their physical outlets, the process of borrowing payday loans has largely moved to the Internet. Usually, all you need is a valid ID card, bank account, and several minutes to complete the application to be able to quickly enjoy the cash you need. This form of borrowing is liked by many Poles due to its speed, simplicity, and limiting formalities to the absolute minimum.

Who takes payday loans most often?

Two age groups dominate among people taking payday loans: very young people, up to 24 years of age, and slightly older people – in the 25-34 age group. The answer to the question of why payday loans are the most popular in these groups is relatively simple.

In the case of people up to 24 years of age, we can often talk about people who do not have a credit history, work part-time, part-time, or civil law contracts, in many cases also students. Even if they would like to take a bank loan and not a  payday loan, getting one could be very difficult, if not completely impossible. Meanwhile, additional funds may be needed to cover current expenses, purchase the first car or electronic equipment. In such a situation, payday loans may appear to be a good solution.

When it comes to slightly older people, although their financial situation is usually more stable, their wages are often low, and expenses are growing. Therefore, for them, the offers of loan companies may also seem more attractive. It should also be noted that elderly people are often reluctant to make commitments via the Internet or use it at all (the least amount of loans via the Internet is included, as you can easily guess, the age group 65+).

Loan targets of Poles

Poles’ loan objectives are very diverse. It cannot be said that most payday loans are incurred to cover current debts, although it is one of the most common ways to use borrowed funds. Payday loans are also taken on:

  • basic needs (food, medicines);
  • renovations;
  • holiday;
  • electronic equipment.

In what situation can a payday loan be useful?

Being in debt is not the only potential reason for a bank loan denial. If we find ourselves in a different type of difficult, non-standard, or complicated situation, loan companies may also be better or even the only, solution for us.

For example, although banks have liberalized their criteria in recent years, it can still be difficult to obtain a loan while employed under a civil law contract ( mandate contract, contract for specific work) or self-employed. Especially if the income is not very stable or very high. In this case, it is worth asking a good credit broker with whom you will be more likely to get a bank loan.

Loan companies are less interested in the source of income and more in its amount. A civil law contract should not be an obstacle, and also, we can include alimony, scholarships, or even social benefits as income, which is not possible in banks. Typically seasonal work, which is characterized by low income in one period and high income in another, is also not a big obstacle.

Another obstacle that makes it difficult to borrow money from a bank, especially when it comes to large amounts, is the lack of credit history. Even despite satisfactory earnings, people without a credit history may be considered unreliable and their applications rejected. This is because the bank, having nothing to lean on, assumes the worst, i.e. that a given person may be an unreliable customer. Loan companies are much less strict in this regard.

Do loan companies grant payday loans to those in debt?

When filling out an application for a loan in a loan company, we will certainly find fields such as “the amount of income” or “the number of installments of liabilities repaid, including non-bank ones. We may be asked to indicate the occupation, duration (and form) of employment in the current company, or the number of dependents. This is because, contrary to the often-repeated opinion, loan companies, or at least a large part of them, do not grant payday loans to absolutely everyone.

They are willing to accept a much higher risk related to granting a loan than banks, but this does not mean that they are willing to accept the application of unreliable people. They usually carry out at least a superficial creditworthiness analysis, primarily based on the data contained in the application. More and more loan companies also cooperate with the Credit Information Bureau, thanks to which they can easily and quickly access information about a person’s credit history (unless, of course, we consent to it when submitting the application, which will probably be required).

Does this mean that loan companies do not grant payday loans to those in debt? Not necessarily. Each company has different rules and conditions for granting loans and also verifies the ability of credit in other ways. Receiving a payday loan despite serious debt is possible, but it must be noted that it will not be as easy as we might suppose. Especially if we act independently and not with the support of an experienced credit intermediary.

Payday loan without BIK – is it possible?

As mentioned above, more and more non-bank institutions cooperate with  BIK. This may be bad news for people who have negative entries in the Bureau’s database and therefore fear that their application will be rejected. On the other hand, you can often come across loan offers or payday loans without BIK. Is this possible?

Yes, because not all loan companies verify the credit history at BIK. This does not mean, however, that they do not check it in any other way, for example by searching for potential borrowers in debtors’ registers (for example in the KRD). However, we must remember that the lack of detailed verification of the credit history means for the lender a greater risk of encountering an unreliable debtor, so such payday loans without BIK may simply be more expensive.

Are payday loans used only by indebted people – summary

As you can see, the answer to the question of whether payday loans are used only by indebted people is not as many people might think. You do not need to be in debt to get a payday loan, whether it is due to the lack of credit history, a non-standard form of employment, or simply the desire to reduce formalities as much as possible and receive cash as soon as possible.