Every payday loan lender has slightly different acceptance requirements. However, completing some small changes can make a big difference in whether your application is approved or rejected.
When you need a payday loan, chances are you need the cash quickly to deal with an emergency or a temporary lack of funds.
Some of the things you can do to increase your chances of approval take time, but you can also follow certain steps right now.
Meet the Basic Loan Criteria
To apply for a payday loan, you will need to be 18 years old or over and be a resident of the UK. In addition, you must have a UK bank account into which lenders will pay the loan and from which you can make the required repayments.
You should also have a debit card linked to the bank account. This must be registered to a UK address.
Many payday loan lenders will also require you to be in either full-time or part-time employment, but this is not always the case.
You will be asked to:
- Enter your name and address, usually with three years’ worth of address history
- Enter your bank details (the account number and sort code)
- Enter your debit card details
- State your employment status and provide the name of your employer and their contact details, along with how long you have worked for them
- Fill in the form accurately – mistakes will lead to an application being declined
- Double check your application before you submit it
- Be honest – the lender is likely to spot any false information and reject your application at the outset
- If your lender offers multiple instalments, only take the amount you think you will need
- Have personal documents, such as your ID, wage slips etc. available should your lender ask for them
- Respond to an offer from a lender promptly. They could withdraw it if you do not accept it in good time
- Seek recommendations for a payday loan from friends or family who may have been in a similar situation or check out comparison sites or reviews online.
- C – Credit rating: Make it as good as it can be
- R – Right product: Pick the lender and the loan criteria which matches your circumstances
- E – Essential: Only borrow what you need
- D – Demonstrate you can afford to repay the loan
- I – Identity: Ensure your lender can verify you are who you say you are
- T – Timing: Pick the right lending term to ensure you demonstrate you will pay back on time.
Check to ensure the payday loan provider will store your bank and debit card details securely and make sure there is no small print that indicates a fee will be paid for something you aren’t expecting.
There’s no need to worry when it comes to providing your employment information. Payday loan lenders should not contact your employer. Instead, they need these details as proof of your employment status.
Demonstrate How You Will Repay the Payday Loan
All reputable payday loan providers will assess your application for the risk of non-payment. This means you will be required to agree on how and when you will make the repayments. If you can’t do so, do not proceed any further.
You will be asked to enter details of your annual or monthly income as well as the source of that income. You will also be required to state when your next payday is. This is so the lender can satisfy themselves that your wage will arrive on or before the repayment date(s).
Demonstrate That You Can Repay the Payday Loan
Your loan lender will want assurance that you have the ability to repay the loan.
This means they will assess your “creditworthiness”. This will take into account a number of factors, including your credit score.
The two main ways you can improve your chances of getting a payday loan are to boost your credit score and affordability rating.
Understand Your Credit Rating Before You Apply for a Payday Loan
Most adults in the UK have a credit rating, which is an overview of your financial status. It is used to confirm your identity and decide whether you are a reliable borrower.
A credit rating is an amalgamation of data relating to your financial circumstances and borrowing history. Think of your credit score as a barometer of how likely you will repay money you borrow on time.
With this data, credit reference agencies calculate your credit score. Lenders may also calculate their own scores to help them decide on lending applications.
Your credit score is kept as up to date as it can be based on information provided to credit reference agencies. Most lenders will provide an update to agencies every month, but there are no fixed rules on how often they should supply data.
This means that sometimes your credit report can contain out of date information or, in some cases, incorrect details.
The information on your credit file comes from organisations including banks, building societies, loan providers, mortgage lenders, car finance companies, credit card providers and other financial organisations.
Your credit report will also include information on whether you have paid your bills on time, such as mobile phone and utility bills. It may also include information on things like rent and insurance payments.
A low credit score suggests to lenders that they are taking more of a risk by approving your loan application. Conversely, a good credit rating will improve your chances of securing a payday loan.
However, not everyone has a bad credit score because of missed payments and defaults; some people have a low credit score because they have no credit history.
Check There Are No Mistakes on Your Credit File
Mistakes on your credit file could affect your application. Therefore, you should obtain access to your report to ensure the information recorded about you is accurate.
You should also make sure that you are registered to vote. Being on the electoral roll enables lenders to confirm your identity and address easily. It is one of the quickest ways to improve your credit score.
Mistakes on a credit file can range from basic errors about your personal details to incorrect information supplied by financial organisations. Errors could deter another company from lending to you.
You may even spot fraudulent activity. For example, this could be a credit application made in your name. If you spot a mistake, you can contact the company that provided the information or the credit reference agency itself to ask for it to be corrected.
The agency will have 28 days from your request to tell you what it has done about it. After that, they will either remove the entry, amend it or take no action. The entry will be marked as “disputed” while checks are being carried out. This is so that any lender searching your file will know the information may be incorrect.
If the credit reference agency does not amend your records, you can add a “notice of correction” of up to 200 words to your file to indicate that you disagree with the information.
Correcting mistakes is a simple way to boost your credit score.
Shop Around for a Payday Loan
Every payday loan lender has different products and credit requirements. This means that shopping around could help you find the best option to meet your needs and credit score.
If you apply without meeting the lender’s criteria, you can be almost certain that it will not be approved.
Different lenders tailor their products to different people. This means that one lender may decline your application while another might approve it.
Some lenders specialise in payday loans for people with bad credit. If you have a poor score, it will be worth looking for a lender which offers products for people who have a less than perfect credit rating.
Shopping around also ensures you get the best deal. But do not make multiple applications for a payday loan soon after each other as credit providers may think this could indicate a serious problem with your finances.
Use a Payday Loan Broker or Loan Comparison Site
Before applying for a loan, look into the minimum requirements and ensure you meet the lending criteria.
Often it is not easy to tell what a lender is looking for. For example, a lender will advertise their basic requirements but is unlikely to publish exactly how they will work out whether to approve your loan or not.
This is because lenders will consider each application on its own merits.
For this reason, using a payday loan broker is a good option. The broker will have a good knowledge of the market, what products are available, and the types of customers certain lenders will accept.
Using a broker will save you a lot of time searching for yourself. It will also help you avoid making lots of applications, which can impact your credit score. Alternatively, you could use a payday loan comparison site so that you can compare products side by side.
Show How You Meet the Affordability Criteria for a Payday Loan
Responsible lenders will want to make sure that you can afford to repay the loan.
This is to assure themselves that they will get their money back and that taking out the loan isn’t going to cause you any serious difficulties.
You should take a close look at your personal finances. Make sure your monthly income minus expenditure leaves you with enough money each month.
You should include rent/mortgage repayments, utility bills, TV payments, food costs, travel expenses, and all credit repayments along with other regular expenses.
Remember, your income may also include things other than what you earn from paid employment. This could be child maintenance or benefit payments.
It is easy to forget some things you payout regularly. However, there are some free and easy to use tools available online to help you calculate your income and expenditure.
The government-backed Money Advice Service has a good budget planning tool you can use. Payday loan lenders will ask you to enter this type of information on your application form. For this reason, it is good advice to work out your monthly budget before you apply.
If you are satisfied that you can afford to repay the loan, chances are the lender will be too. However, if you think you may not have enough left to make the instalment(s), you should think again.
It may be as simple as cutting back on something next month. For example, could you reduce your non-essential expenditure such as entertainment costs or spending on clothing?
Remember only to take out the payday loan if it is essential. For example, if an essential bill to repair your car means you need to borrow some money, you should consider whether reducing your expenditure on something less important next month is worth it. Often it will be, but only you can decide that.
Demonstrate That You Are in Control of Your Own Financial Situation
To apply for a short term loan, the lender will want to check that you are not in a situation where you have an increasing level of debt or long-term money issues. Your lender will look into this, so it’s important to demonstrate that you are in control.
If your overall debt is increasing, a lender could consider it a risk to lend more money to you.
If your debt levels have become out of control, a high-cost, short-term loan is unlikely to rectify the problem. In fact, it could exacerbate it.
You may wish to pause and apply for the loan at a later date when you have managed to get things back under control.
However, there are situations when a payday loan can actually help you regain control of your finances. For example, if you are going to become overdue on an essential payment, a payday loan will help you get on top of it in the short term.
Pay Off Existing Payday Loans First
Responsible lenders do not wish to trap anyone in a cycle of debt.
Some negative press about payday loans suggests that some irresponsible lenders can gain from customers “rolling over” their loans or extending the repayment date.
This is not the case. A lender will charge you a fee to extend your repayment period. This is to protect themselves from offering an extended repayment term.
Allowing customers to become stuck in a cycle of debt and rolling-over repayments benefits no one. On the contrary, if customers end up defaulting on loans, this costs lenders money.
So you should try to pay off any existing loans before you apply for a new one. Taking out one loan to pay another loan is not a good idea. Lenders will look upon you favourably if you have paid off previous loans.
There may be circumstances when consolidating loans makes sense. Generally, payday loans are not a good idea for consolidating debt unless it is a short term measure that you can afford to repay.
Have a Good Reason to Borrow Money for a Payday Loan
Some quick loan companies will ask for details about the purpose of your loan. For example, why do you need money? What will you use it for?
Providers of short-term finance are less likely to ask this than traditional lenders. But, again, this is because the reason will often be a short-term cash flow issue.
You may need to borrow the money for daily living – remember, this is fine, nor is it uncommon. However, you may still need to state what you will use the loan for.
If you are applying for finance for a holiday or a luxury purchase, you are less likely to succeed because payday loans are not designed for this purpose. Likewise, if you want to take out short term credit for home improvements, your application may also fail because there are better finance options for things like this.
Only Apply for What You Need to Increase Your Payday Loan Chances
The less you apply for, the more likely you are to be accepted for a payday loan.
This means avoiding the temptation to apply for more than you need. It will only cost you money in the longer term and could tip you from acceptance to rejection.
Before deciding how much money you would like to borrow, seek to reduce what you think you will need. Could you buy cheaper food for a few weeks? If you need the money from a payday loan for petrol, would half a tank get you by rather than filling up?
Consider a Guarantor for a Payday Loan
With a poor credit rating or an unsteady income, you might find lenders will not provide the funds you need. You may wish to consider a guarantor loan.
Because your loan is backed by someone else, your chances of being approved will increase enormously. In addition, if you cannot afford your payments, your lender can seek payment from your guarantor. This offers them a greater reassurance that they can collect the money owed.
You may wish to ask a trusted friend or family member to act as your guarantor. Guarantor loans often have a lower APR as a reflection of the reduced risk involved to lenders.
Of course, not all of us will have someone we can ask to be a guarantor, or we may feel uncomfortable asking for help.
Tips and Tricks for Getting a Payday Loan
Other things you can consider to increase your chances of approval for short term loans are:
Above all, if you find yourself in a situation where you need short term cash fast, do not panic.
Consider your options and your circumstances. Is this the right product for you? Remember the Money Advice Service and others offer free-to-access services.
Get together all the information you need to make an application and consider a payday loan broker to help you identify the best loan for you.
Finally, remember the golden rules of credit: