5 Reasons You Might Be Denied a Payday Loan
Payday loans are generally, easier to get than traditional bank loans. Lenders do not normally require collateral or an unusually high income to qualify. Still, there are times when consumers are denied loans.
Rest assured, payday lenders want to provide a service to those that need funds. So if you apply for a payday loan and are denied, there is probably a reason behind it. You typically receive a notice of adverse action indicating reasons why. Be sure to check there if you are denied for a payday loan. If it’s something you can fix, get it taken care of before you apply again.
Here are five reasons you might be denied a payday loan:
1. Insufficient Income
Payday lenders want to make sure consumers have sufficient income to repay before approving an application. That’s why they ask for recent proof of income. They look at proof of income to verify the borrower has enough income to cover the loan. If you were denied, perhaps it’s because your income is insufficient compared to the amount you want to borrow.
2. Extremely Poor Credit
It is true that you don’t need stellar credit to get a payday loan. But lenders are not in the habit of lending to people they believe are not going to repay what they borrow. Lenders run credit checks for that very reason. If your credit rating is on the extremely low side, it may give the lender pause. Combined with other extenuating factors, poor credit could be enough to result in application denial.
3. Late Payments
If you are currently late on payments, payday lenders may not take the risk of being late on payments again. Consistently late payments could demonstrate to a lender that you have a hard time managing money.
If you’ve borrowed from payday lenders before, previous problems with those loans are likely to reflect poorly on any new loans you apply for.
4. Outstanding Payday Loans
It is illegal in some states for a payday lender to lend to someone who currently has an outstanding short-term loan from another lender. And even in states where multiple short-term loans are legal, lenders may have policies in place that prevent multiple outstanding loans simultaneously.
If your loan application was denied, do you already have an outstanding payday loan? If so, pay that loan off first. Having multiple outstanding payday loans at the same time is just a bad financial idea.
Most payday lenders won’t lend to someone currently filing for bankruptcy. This is considered a high risk for lenders.