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If your application for a payday loan has been declined, then you may feel as though you’ve exhausted all your options.
While there are still ways you can access the money you need to deal with a financial emergency, at this point, it’s worth taking a step back to understand why you’re application has been declined, so that you can decide what to do next.
There could be a number of reasons why your application for a payday loan has been rejected. We’ve taken a look at what these are, and what the options are for your next move.
These are the three most common reasons why you may not be able to get a payday loan:
1. You have a poor or limited credit history
One of the first things a lender does when you apply for a loan is to evaluate your credit history. It’s important that you check your credit report regularly so that you’re aware of what it says. Your credit report details all of your borrowing history and how you have managed credit in the past. If you have missed payments or have defaulted on any credit accounts, are in a debt management plan of any sort – including IVAs and Debt Relief Orders – this will be flagged and lenders will be able to see this.
Depending on how recently your missed payments were, it could prompt them to believe you are likely to miss payments to them too and decline your application. Equally, if you’ve never borrowed money from a credit provider before, then you won’t have any credit history that shows you’re able to pay back what you’ve borrowed. This can make lenders hesitant to approve your application, too, as they simply don’t know what you will do.
When lenders are deciding who to approve and who to decline for a loan, they assess applications in terms of risk. Your credit report doesn’t give a lender all the context behind why you missed a payment a couple of months ago, and even though you may well have had a good reason for it, this will still be a red flag to a lender.
The longer ago a missed payment or default occurred, the less likely the lender is to place a lot of relevance on that event. This is particularly true if you have a credit history that demonstrates you are able to reliably make payments and pay back loans in full that is more recent than the negative event.
2. You don’t have a regular income
For the purposes of determining affordability, most lenders will ask that you have a regular income, and may also verify this as part of their checks when you apply for a loan with them to ensure you have the funds to pay back what you’ve borrowed. If you are unable to demonstrate that you have a regular income or the lender cannot verify your income, then this means they may not have the assurance they need that you are able to repay a loan. This may result in your application for a loan being declined.
3. You already have a number of other loans
Most lenders, perform an affordability assessment alongside a credit check to make sure that as well as being likely to pay back a loan, it’s also affordable for you. If you are already making repayments on numerous other loans, then the lender you’re applying to may decide that you already have a significant number of financial commitments, and it would be irresponsible of them to add this.
In this situation, the lender may likely decline your application on grounds of affordability.
The next step is to take a look at how you may be able to improve your chances for the future when it comes to successfully applying for credit. This includes working to boost your credit score and remove any negative notes on your credit report.
If you need the money for an emergency, you could consider joining a credit union. These are a solution for those who are struggling to obtain a loan from the high street and are created by a local community. You can find a credit union in your area here – as well as use one to manage your savings and even banking.
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