A payday loan is a high-cost short term loan which allows you to borrow money, usually around $100 to $1,000, which is repaid over a relatively short period; typically one month. This money is lent on a higher-than-average interest rate basis. For this reason, these loans are not for everyone in all financial circumstances and there are times where you should avoid such loans. Payday loans are also illegal in several states throughout the US and thus, you should not try and find loans in those states as you may fall victim to predatory lenders.
Much like any form of secured and unsecured or personal or business loan in the US, it is possible to be rejected for a payday loan for a variety of reasons. Importantly, lenders will always aim to assess your suitability for a loan and your likelihood of being able to repay them on time. The higher the risk of a borrower to a lender, the lower the chances of receiving the loan you need.
Despite their potential risks, payday loans continue to be popular throughout the US due to their ability to provide funds quickly with a swift application process that does not always require a good credit score. But what is the process for applying for these loans, and is it possible for your application to be declined?
Can Your Application For A Payday Loan Be Declined?
Yes. you may find that your application for a payday loan of any amount can be declined by the lender. If you look like too much of an unreliable borrower on your application form, a lender may actually decide against lending you any money. In fact, there are several reasons why a lender may simply decline your payday loan application.
To begin with, having a poor credit rating can cause your application to be declined. Although payday loans do not typically require a high credit score, if it is too low this may prevent you from acquiring this loan.
If you find that you are turned down because of bad credit, you will need to improve your credit score before you can try and apply again.
If it is not because of your credit score, it may be because of your past borrowing history. Your borrowing history may work against you if it does not read well. This means that it shows that you, for example, already currently have a lot of unpaid debt or have borrowed in the past and failed to make the repayment.
This will indicate to a lender that you may not repay your payday loan, therefore making them reluctant to lend to you.
Your income may also cause you to get declined for a payday loan. If your income does not look like it will be enough to make your monthly repayment, a lender will likely decline your application.
A lender will only loan to a consumer they are sure will be able to repay the payday loan plus its exorbitantly high interest on time and in full. If your application suggests this may not be the case, your application may be declined.
Common Reasons Why You Were Declined For a Loan
First and foremost, you should always check to see whether you have any alternatives to a payday loan before you go ahead and apply for a loan online or otherwise. Perhaps talk to friends and family and it may even be worth checking whether your credit card provider can help you with the funds you need for the financial emergency you find yourself in.
Common reasons to be rejected for a payday loan in the USA include the following:
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Why Do People Apply For Payday Loans in the First Place?
In the states in which payday loans are legal, they can be a popular choice for those in need of some quick emergency cash loans.
Payday loans are a type of unsecured loan, meaning they can offer borrowers a way of withdrawing money without needing to provide any asset as collateral. As they are a type of short-term loan, they can tide you over in a period of financial difficulty. They also do not require a high credit score and can be applied in-store or online in a quick and easy process.
However, the extremely high-interest rates that are charged on payday loans mean they can create a debt trap for consumers. These loans should therefore only be applied for if it is an absolute necessity. But if you do decide to take the leap and apply for a payday loan, is it possible for your application to be declined?
What Is The Application Process For A Payday Loan?
You can apply for a payday loan either in-store or online. The application process is relatively simple and can take just a few minutes. You must first be sure to pick the right lender for you. To do this, make sure to shop around at different lenders and always choose the one that offers the best rates and is well-rated by others.
When applying, you will need to provide your personal information such as ID documents and bank details as well as your financial details. This will include things like your borrowing history and credit score, and a lender will want to know about your current income and outgoings, as well as your employment history.
This information will all need to be provided so that the lender can decide whether you look like you will be able to repay the payday loan, or if you appear too risky a bet.