Have you found a lender, or loan broker, that offers a guaranteed payday loan?
You are right to be cautious.
No matter how good your credit rating, there are no guarantees.
Why there are no guaranteed payday loans
Any lender that provides a short term loan will have to abide by FCA regulations.
The Financial Conduct Authority requires all lenders to be responsible with each loan approval.
Lenders will only approve your application if they believe that you can afford it. If there are any doubts about your ability to meet the repayment schedule, you are unlikely to be offered a loan.
How lenders make loan approval decisions
Your credit rating
Lenders will look at your credit rating. This is usually one of the first steps in the loan approval process.
Three UK agencies maintain credit files. These are Callcredit, Equifax and Experian. Lenders can apply for credit score details from one or more of these agencies.
Each credit referencing agency will judge your credit history slightly differently. One may paint you in a more positive light than another. Lenders can choose which to use. Each lender may see a different picture of your creditworthiness.
Lenders will also make their own judgments about your current credit score. All lenders need to be cautious, but some may be slightly more lenient than others.
A lender’s own algorithm
Providers of payday loans will have their own internal algorithms, which they use to make each lending decision.
Each piece of information that they consider is a data point.
Data points might include your postcode, your age and your current salary. Increasingly, companies rely on your online behaviour to build a bigger picture of who you are.
Lenders will judge how much risk you represent. They will use many data points to form their decision.
More importantly, their algorithm may change as they add more data points or change their opinions of existing ones.
A lender may find that most people on a £13k salary, approved previously for a short term loan, have been unable to pay back their debt. They might then adjust their algorithm so people earning £13,000 will be less likely to gain loan approval.
Being offered a guaranteed payday loan
Authorised and regulated lenders will never offer a guaranteed loan. It would be irresponsible of them.
Lenders must carry out stringent affordability assessments, before making any final decisions.
If you notice a website offering guaranteed payday loans, you can report the lender for a review by the Financial Conduct Authority.
Authorised lenders will feature on the Financial Services Register. You should always check this before applying for a loan.
Some brokers may make promises guaranteeing that your loan will be approvad.
This claim cannot be genuine. No broker can ever be certain of a lender’s decision, or the complex algorithm that determines it.
You can protect your interests by viewing the Financial Services Register before your application. Both lenders and brokers will feature, ensuring that you can avoid being the victim of a scam no matter how you make your loan application.
Applying for a payday loan through a loan broker
Whilst a loan broker cannot guarantee that your loan will be approved, they may be able to increase the possibility. This is because each loan application leaves a footprint on your credit file.
This is because most loan applications with a direct lender will leave a footprint on your credit file.
This could mean that ff you apply for a loan directly and are not offered any credit, your second application may stand less chance of getting approved.
Each lender will check your credit file. They will see footprints that have been left behind during previous applications. Having many footprints on your file could say that you are struggling to get a loan. It may suggest that you are in a desperate situation and could be a risk to a lender.
How a loan broker is different
When you apply through a broker, there will be only one form to fill in.
All lenders within a broker’s portfolio will receive your application at the same time. They will not see a history of application footprints on your credit file.
Instead, they will look at the details on your application to make a ‘provisional’ offer.
Some lenders will immediately turn you down. Fortunately, applying to many at once will increase the possibility that you will receive at least one approval in principle.
Approval in principle
Even having received an approval in principle, your loan is not guaranteed.
These decisions are based on the claims in your application form, including your own calculations of income and expenditure.
Lenders may ask for further proof or evidence. They may also need new pieces of information, before making their final decision.
When you apply through a broker, no approval is final. You are not committed to borrowing money at this stage.
The results that you receive are offers from lenders. They are offering their money, subject (potentially) to a series of further checks.
Results rule out lenders that guaranteed to refuse your loan application. They do not provide absolute certainty that everything has gone to plan.
If you decide that you would like to apply for a loan, then you will need to finalise your application directly with your chosen lender.
Only once an application is finalised will the money appear in your bank account.
Guaranteed payday loan alternatives
Whilst a truly guaranteed payday loan is out of the picture, there is a type of short term loan that offers a pre-guarantee.
Some lenders are offering loans on a revolving credit basis. These lenders include SafetyNet Credit.
When you apply, instead of being approved for a loan you are offered a personal credit limit – much like a credit card.
You can use your credit limit at any time. You do not need to take a loan immediately. Your credit limit will show how much you are able to borrow. That amount of money guaranteed unless the lender revokes the offer.
You can also pay back your loan and then borrow the money again, up to your credit limit. This means that future loans are pre-approved.
Steps to take when offered a guaranteed payday loan
If you are offered a guaranteed payday loan, or a loan with no refusal, then you should take the following steps:
Check the lender’s website for signs of FCA authorisation
Search the lender’s website for a registration number or reference number. This number is for the FCA’s Financial Services Register. Use this to find their details on the register. If their details are not listed, they are not an authorised and regulated lender.
Use this number to find their details on the register. If their details are not listed, they are not an authorised and regulated lender.
Many unauthorised lenders use false codes. Do not rely on the fact that they have listed a reference number, as a guarantee that they will be on the register. Anyone can make up a string of numbers.
Look carefully through details on the Financial Services Register
If the lender appears on the Financial Services Register, are the details all accurate?
Do their contact details match with the ones listed on their website?
Unfortunately, there are ‘clone’ lenders that can be convincing. You will need to be sure that you are borrowing from the real lender, not a clone.
Clone lenders may have copied the real lender’s website, or other details. They may have changed certain information, such as the contact phone number.
In some cases, they may even have kept the phone number the same. Yet, a contact form on their website might pass your details to someone else.
Check that the website domain matches the one listed within the Financial Services Register.
If in doubt, use the details on the register to directly contact the lender.
Beware of unauthorised loan brokers
If you are using a loan broker service, it is important to remember that these also feature on the Financial Services Register. Do not forget to check.
If a broker is promising that your application will lead to a guaranteed loan, then they are taking a big risk.
Any broker can apply to enough lenders to almost guarantee a positive response, but:
- They cannot be sure that they will receive a positive response, before they submit your application.
- If they are promising a guaranteed loan, they are likely to be working with unregulated lenders. You may receive a positive result, only to end up directed to a lender that is not authorised.
- Some unauthorised lenders may be wrapped up in a loan broker shell. This means that the loan broker will only pretend to search the market. You will receive positive results, but your application will not actually have gone anywhere at all.
Some unauthorised lenders will turn out to be loan sharks. You will receive the money, but could later become the victim of a campaign of harassment or extortionate interest charges.
In other cases, the websites simply collect your data – including personal details – which may be used for identity fraud.
Staying safe when borrowing money
The promise of a guaranteed payday loan is certainly going to be tempting. This is especially true if you are having a financial emergency.
Stay aware. Never rush your decision when applying for a short term loan. Take your time and check that the lender is authorised.
Some unregulated lenders can be convincing. You cannot rely on the claims of one website alone.
If you have any concerns, contact the Financial Conduct Authority. Do this before moving forward with your loan application.