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When you need to cover an emergency expense, the first place to turn is your savings. However, in the UK, only one in four adults has savings in their account and so many turn to payday loans to cover unexpected costs that arise on top of their everyday expenses until they are paid.
If you’re considering a short-term loan with a longer repayment schedule like the type Sunny offers access to, then this guide can help when it comes to improving your chances of being accepted.
Am I eligible for a payday loan?
When it comes to the basics, you should check that you meet the eligibility criteria of the lender you’re looking into. Each lender has its own set of criteria, for example:
You’ll also need:
Some lenders have slightly different criteria so it’s a good idea to check first what you need to be deemed eligible for the lender you are considering.
Payday loans are for emergency solutions, so it’s difficult to plan ahead for when you may need one. However, it’s always a good idea to manage your finances with your credit report in mind.
Your credit report isn’t just important for emergency loans, a good credit history means you’ll have a greater variety of credit products available to you when you need to borrow money and can get you better rates on things like a mortgage or credit card.
It is also used to determine if you will be accepted for credit contracts such as pay monthly mobile phones or car finance. Here are a few things you can do to improve your credit report ready for the future and if you should ever need to apply for a short-term loan or other credit.
Depending on the credit reference agency or credit reporting service you use, each one displays your report differently. The first thing you’ll want to look at is your score, which puts a number on how good your credit history is – and each one uses a different scoring system. Experian scores you out 999, with 0 the lowest and 999 a perfect score. Equifax scores out of 700 and TransUnion (formerly CallCredit) is 710.
This means the number and how it matches up to how good the score differs between these agencies. An Experian score of 700, for example, is considered good while with Equifax it’s a perfect score. Consider more where you sit on that agency’s scoring scale, as this should be comparable between agencies.
There are free services available to view your credit report, these include Credit Karma and Clearscore that give you a snapshot of your report and the key things that you need to be aware of. Your credit score gives you an instant idea of the state of your credit report before you look at it in detail.
Once you’ve noted your score it’s time to move on to the report itself. You should look at your history and ensure that all the lenders and credit types listed there are ones that you recognise. You should also look to see if there are any errors, such as payments marked as late that weren’t or defaults that should have been removed. These can have an impact on your credit history so it’s important to sort these if they shouldn’t be there.
You’ll also be able to see your current payment schedules for things such as loans or bills and check that they are all in order.
Your credit report is also really helpful when it comes to tackling fraud. A fraudulent loan or credit card listed on your report but not actioned by you can have a damaging effect on your ability to get credit, so this is why it’s important to check your report regularly.
As well as being free, Credit Karma and Clearscore both have mobile apps that you can access whenever you fancy to quickly check in on how you’re doing. If you spot any fraudulent activity, contact the lender immediately to make them aware. You should also contact the Credit Reference Agency you’re using, as well as Action Fraud who will log your report of the fraud and notify the police if there is enough evidence – as well as warn others.
Your score can be given a boost by making some small, simple changes. For example, if you aren’t enrolled on the electoral register, consider doing this.
It provides the Credit Reference Agencies proof of your permanent address, so their scoring and the details they hold are more accurate. Inputting your address details for the past three years to six years will also improve your report and score.
We’ve already discussed eligibility but it’s also important when applying for a payday loan that you have the right evidence and documentation to hand to share with the potential lender.
It’s likely you’ll apply for your loan online but sometimes when the lender is reviewing your application they may need some further information or evidence from you.
That’s why it’s a good idea to rifle through that file of important documents at home and pull out the statements and letters you may need.
This could include bank statements, utility bills, and even tenancy agreements or mortgage documents should you need to prove your address. Having these to hand will prevent delays in processing your application and mean you’re more likely to get a decision on your application before it expires.
You may be tempted to apply for a larger amount so that you have a little more cash than you need, but this isn’t recommended. After all, you’ll still have to pay it all back eventually, and the more you borrow, the more interest you’ll need to repay, too.
For example, if car repairs or a boiler part amount to £190 then £200 is a reasonable loan amount to apply for. However, applying for £250 to cover yourself could be the difference between being accepted or declined for your payday loan.
Lenders will assess your creditworthiness and affordability when deciding how much to lend to you, so if your credit history is less than perfect or you already have a lot of other commitments, you’re more likely to be accepted for a smaller loan than a larger one.
Remember, applying for what you need or a smaller amount puts you in a better financial position in the future, as you’ll pay less interest overall as well as knowing you can comfortably afford the repayments.
While it is possible to take on more than one payday loan, it isn’t recommended. If you want to improve your chances of being accepted for a loan in the future, it’s a good idea to tackle the debts you already have first.
If you are struggling with repayments it’s very important you do not take on a payday loan in order to keep up with your payments to another lender. This can lead to a cycle of debt that may be difficult to get out of. We recommend you seek free and impartial debt advice from a not-for-profit service such as Citizen’s Advice or StepChange.
For many people, applying for a payday loan is something they look into if they’re dealing with an emergency and have exhausted all other options when it comes to obtaining the cash they need.
However, since you can never know when an emergency might arise, it’s always a good idea to look ahead to ensure your finances are in good order and your credit report is in a decent state.
Try some of the tips in this guide to improve your chances of being accepted when you do need credit, and feel confident that you can tackle anything life has to throw your way.
Representative Example: Borrowing: £1000 for 18 months, Total Repayable: £1853.43, Total Interest: £853.43, Interest Rate (Variable): 89.9%. Rates between 9.3% APR and 1721% APR – your no-obligation quote and APR will be based on your personal circumstances. Loan term lengths from 3 to 36 months. Subject to lender’s requirements and approval.
Sunny Loans is a registered trading name of Upward Finance Limited, who is an introducer appointed representative of Flux Funding Limited, who is a credit broker, not a lender. Loan repayment terms are 3-36 month loans.
Warning: Late repayment can cause you serious money problems. For help, go to www.moneyhelper.org.uk.