Have you ever had your payday loan application declined? No need to worry as there are many ways to mend it. Let’s take a look at the five main reasons lenders decline your payday loan application, and how to fix them once and for all:
Have You Been Declined For a Loan? This Could be Why!
The fact that lenders decline your payday loan application is somewhat good, as it shows you that your lender is credible. They do not just give money to anyone, particularly those that seemingly can’t afford it. So, don’t be put off, as your lender is likely to be doing what is best for you and protecting you from buying a product you can’t afford.
- You are unemployed
- You have a bad credit score
- You’ve taken out multiple payday loans Already
- You Have No Evidence Of Regular Income
- You’re A Gambler
The main reason behind payday loan application denials is that the applicant is unemployed. When you apply for a payday loan, you’re entering into an agreement with the lender. They’re giving you money to use, and you agree to pay them back with interest before a certain date. If you fail to pay them back, then they’re going to lose a lot of money. They’ll lose the cash they lent you, and the interest charges which act as a fee for them.
As such, the lender needs to know that they can trust you to pay them back. And, one of the easiest ways to figure this out is by looking at your employment situation. If you don’t have a job, then you have no regular income to rely on. As a result, you’ve got no money coming into your account that can cover the cost of your loan. From a lender’s perspective, this makes you a risky customer as there’s no guarantee you will pay any money back. It would be reckless for them to allow an unemployed person to take out a loan, so they end up declining these applications.
How you can fix this:
It’s simple, get a new job. Either find some full-time work or do a bit of part-time stuff too. Alternatively, you may be in a position where you had a job but have been let go, hence the reason you need a payday loan. In which case, you could send the payday loan company a copy of your bank statement to prove you have some money and are just looking for a new job. Also, showing them a statement can also point them towards passive income you might generate through investments or benefits.
While there are bad credit loans available, most respectable and legitimate lenders will only approve applications where the person has a good credit score. Again, this goes back to the point made earlier about them needing to trust that you’ll pay the loan back on time. They conduct a credit check and get a brief look at your credit history. If things are bad, then they don’t want to take the risk and will decline your application.
Why does a bad credit score equal an application decline? Well, let’s take a look at some of the factors that contribute to a bad score; not paying things on time, borrowing too much money, being in too much debt. These three things don’t make anyone a very good candidate when applying for any loan let alone a payday one. A payday loan company won’t want to risk approving the application of someone who’s already in debt and has proven to make late repayments on everything else.
How you can fix this:
To counter this, you need to work on building your credit score back up. How can you do this? By looking at what causes bad credit scores, and doing the opposite. Make sure you pay all your bills and other payments on time, every time. Perhaps set up a direct debit to ensure you always make these payments? Secondly, work on getting yourself out of debt as quickly as you can, and borrow money responsibly. Don’t become dependent on loans, figure out ways you can solve money problems without borrowing from everyone. If you do this, you won’t need to apply for payday loans again.
When a payday loan company is viewing your application, they’ll be able to look at your financial history. Part of your history includes any previous loan applications you’ve submitted. If they notice that you’ve applied for multiple payday loans from various lenders, then the alarm bells start ringing.
Think about it, what type of person needs to apply for so many payday loans in a short space of time? Someone with constant money problems that are affecting them in the long term. This is not the type of person a payday loan company wants to do business with. Of course, if you’ve taken out payday loans a few years back, then this shouldn’t affect your application. Specifically, they’re wary of people that have one of these issues; they’ve taken out a payday loan in the last three months, they already have an existing payday loan that needs paying off, or they’re applying for this payday loan to pay off another loan. If any of these scenarios applies to you, then that’s probably why you were declined.
How you can fix this:
Fixing this issue is perhaps easier said than done. On the face of it, all you have to do is ensure you don’t take out loads of payday loans in a short space of time. To do this, you need to spend less and save more. This limits your need for payday loans, and you shouldn’t fall into the spiral of relying on multiple ones all at once. Instead, you can keep things steady and only apply for one when you need it in special circumstances.
As we established in the first point, payday loan companies don’t want to approve applicants that don’t have a source of income. Most companies make you state your occupation when you’re filling in their application form. However, there are times where someone may be in employment but have no concrete evidence of regular income. As a result, the payday lender assumes they don’t have any income, and their application is not accepted.
Instances like this are common amongst anyone that is paid in cash. Certain people may work jobs where they aren’t given contracts and don’t get payments sent to their bank account. Instead, they get paid by clients in cash and can use that cash as they please. The benefit of this is that you earn tax-free money. The downside is there’s no evidence that you earn any money. You don’t have transactions on your bank statement that can back up the fact that you are employed and make a decent amount every month. Without this evidence, payday loan companies can’t approve your application as they simply can’t be sure that you have an income and can afford their loans.
How you can fix this:
So, all you need to do is provide evidence of your income in some way or another. In some cases, you may get your clients to fill out invoices or payslips when they’re meant to pay you. This is to help you keep track of everything without taking bank payments. Send these to the lender, and they can use it to verify that you have an income and will approve your application.
Finally, lenders decline your payday loan application when they think the payday loan applicant is a gambler. Often, you don’t even have to be a proper hardcore gambler to get declined. If they check your statements and see that you’ve made payments to gambling sites, then they won’t approve you. Spending money on gambling is seen as an irresponsible thing to do with your money. Does a payday lender really want to hand out hundreds of pounds to someone that’s not responsible with their money? No, of course not.
From their perspective, they’ll be giving a loan to someone that’s proven to spend money gambling in the past. So, how do they know their money isn’t going to be spent on a gambling site? It’s a risk they’re not willing and don’t need, to take. Things will reflect badly on them if it’s found out that they’re financing gamblers with payday loans. So, they choose to decline applications from anyone that uses gambling sites regularly.
How you can fix this:
Fixing this problem is simple; don’t use gambling websites! If you like to have a flutter on the races or stick a couple of quid on the football, go to your local bookmaker instead. Or, to be extra safe, just don’t gamble at all. Your finances are much safer when you don’t gamble, and your payday loan application won’t be negatively affected.
Conclusion- Why Lenders Decline your Payday Loan Application
There you have it; these are five of the possible reasons that lenders decline your payday loan application. Of course, make sure you check the minimum requirements set out by the lender before you apply. This will tell you everything you need to be approved as quickly as possible. Sometimes lenders decline your application for a UK short term loan simply because they didn’t meet simple requirements such as age or residency requirements. If you feel you’ve met the minimum requirements, but still get declined, it’s probably down to one of the issues above instead.
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