Has your application for a payday loan been declined? Don’t worry. A large proportion of loan applications never make it through, and there may be a way for you to fix it. Read on to find out the reasons your loan might have been declined, and what you can do about it. 

You’re unemployed

The single biggest reason for your payday loan application being denied is because you’re unemployed. Remember, a payday loan is still a loan, and the lender wants you to pay it back. 

This means if you don’t have any means of paying it back, you’re a huge lending risk that the lender won’t want to enter into agreement with. 

If you fail to pay pack a lender, they lose twice. The lose the capital they lent you, and the interest and fees that you agreed to pay them. They might also have to incur extra costs to recoup the loan, or just write it off. 

So the lender needs to know you can pay back the money. The simplest way for them to do this is look at your cash flow. If you don’t have regular money, you’re not likely to be able to repay. It’s called a ‘payday loan’ for a reason. 

How to fix this

Simple. Find gainful employment. Whilst that might not be the easiest advice to follow, it is the method you can use to gain access to a payday loan. 

Alternatively, you could show the lender that you have alternate means of payment, or income from another source.

Your credit score isn’t very good

Most lenders don’t want to take risks, and your credit score is exactly that, a record of how much of a risk you are, based on past behaviour. 

Whilst some lenders might offer bad credit payday loans, others often won’t, so having a good credit score is hugely beneficial when applying for loans, payday or otherwise. 

All lenders are going to perform a credit check on you before authorising a loan, so try and maintain your credit score. This means avoiding things like:

  • Not paying other debts or bills on time
  • Borrowing too much money
  • Already being in debt

How to fix this

Build up your credit score. Pay your bills on time, set up direct debits to make your payments, get out of debt, as soon as you can. Make sure not to borrow what you can’t afford to pay back. 

Put simply, the smarter you are with money now, the easier it will be to gain access to it in the future. 

You have multiple loans, or loan applications, on record

Your credit score includes a section on previous loans and loan applications. 

If you have existing loans, especially if they’re reaching the limit of what might be considered reasonable for you to pay back, it’s unlikely that you’ll be able to access any more lines of credit. 

Also, if you have several failed applications for loans on your record, subsequent lenders will see this as a sign that you’re not a good risk. After all, if you’ve already been turned down multiple times, there could be a significant reason why. 

Specifically, lenders will also look for people who already have payday loans. If you have an existing payday loan, or you took out a payday loan in the last three months, you are far less likely to be able to secure another. 

How to fix this

Again, the advice for avoiding this is simple in principle, but difficult in practice. 

Only take out loans when you absolutely have to, and don’t take out lots of loans in a small amount of time. 

When you’re in a bind, this is easier said than done, but by following good financial practices and getting control over your financial life by cutting costs and increasing incomings, you reduce your need for payday loans. 

There’s no evidence you have any income

As we said earlier, lenders want you to be able to repay their loans. So not having  visible source of funds is going to make them wary. 

But there are situations when this is unavoidable. For example, if you’re paid in non-specific increments, for example on completion of long term contracts, or if you’re regularly paid in cash which is spent before ever seeing a bank account. 

Without records of regular income, you’re less likely to be able to get a loan, payday or otherwise, so what can you do?

How to fix this

Provide the evidence. If you can get invoices or contracts that prove you have regular income, or money coming on a specific date, provide them. 

If you get paid in cash, pay it into your bank account, so there’s a record. This way, you’ll easily avoid this pitfall. 

You regularly gamble

Gamblers, even low level gamblers, are considered extremely high risk by payday loan lenders. 

Having evidence that you regularly gamble, for example payments made to gambling shops or online websites, is a huge red flag and will almost always count against you. 

Consider it from their perspective. You’re a proven gambler. What’s the proof that you wont gamble with this money, in an attempt to (foolishly) increase the amount of money and pay back the loan whilst keeping the profit. 

How to fix this

Don’t gamble. Or, at least, if you do like the odd wager, (without it becoming excessive, always gamble responsibly) do it in a way that isn’t visible to lenders.  

Conclusion

So here we are. Five reasons your payday loan was refused, and five ways to solve these common issues. By following the advice laid out here, you’re far more likely to be able to get a payday loan in the future, when you need it most.

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