Payday loans are the quickest loans and hence, most of the borrowers look to getting them as an unexpected expenditure rear its head. Much as you can take out these loans with a bad credit score, your lender has full authority to turn down your loan application. The higher the default risk, the lower the chances of approval.
Your lender will approve a payday loan and 12 month Loan after considering your repayment capacity. If they suspect that you will not be able to clear all your dues, your application will be rejected. However, this is not the only reason for rejection.
Here are the reasons why a lender does not approve your application
Lenders often rebuff the application without giving an exact reason. Following situations might be blamed for denial.
Too many existing payday loans
Before the lender signs off on your loan application, they will consider your affordability. Following reasons are enough to decline:
- If you are currently paying off other payday loans
- If you intend to take out the loan to pay off other debts
In such a situation, you should apply for debt consolidation loans or emergency loans.
You are unemployed
Unemployment is a big snag. Lenders are always concerned about your repayment capacity. Lack of full-time employment is enough to create doubt on your repayment capacity.
You have a very poor credit score
These salary day loans have been generally designed for bad credit borrowers but your chances are almost nil if your score is under 560 or CCJ has been issued against you.
You did not meet minimum requirements
Before you apply for these loans, make sure you meet the minimum criteria mentioned on your lender’s website. If you do not meet the criteria, your lender will not approve your loan application.
What should you do if you are being refused constantly?
The loan market is very flexible nowadays. You still have some other alternatives like cash loans, emergency loans, text loans, and the like, but the disbursal limit of these loans is less than the payday loan. Try to figure out the flaws and mend them.
Talk to your direct lender
Contact your lender and ask for the reason for dismissal. They will share information with you if they have an obvious reason like a very poor credit score. However, sometimes they cannot give you apparent reasoning as they use very complex algorithms to shortlist your loan application.
Peruse your credit report
Your credit report may consist of wrong information. It may show a default that you have not made or it may show your account still pending that you have settled months ago. Before you take out a payday loan, you should get the report from credit bureaus. Go through them carefully and ask for rectification if you find an error.
Try to improve your credit score
Direct lenders run a soft credit check to assess your debt history. This helps them know about a number of defaults you made. The higher the defaults, the lower the score, and the higher the rejection rate will be. Try to improve your score by paying your other payday loans or short-term loans, credit card bills, and utility expenses on time. Try to avoid using credit cards unless you have settled all your debts and make a budget to avoid overspending. With a good credit score, you can get these loans at lower rates of interest.
Your payday loans can be easily approved if you prove your repayment capacity. If you have been struggling to have it approved, you should follow the aforementioned tips.