From 2014, news outlets were reporting the payday loan market was allowing excessive borrowing. Lenders were often providing short-term loans to borrowers who could not afford repayments. This meant there were few concerns about how to get a payday loan approved because lenders had high approval rates.
Today, the payday loan industry is regulated by the Financial Conduct Authority. Borrowers get subjected to much more stringent affordability checks for their own protection. As a result, approval rates are much lower, with loans only given to borrowers that pass affordability assessments.
Even still, payday lenders often approve applications for loans that traditional lenders would not. They charge higher interest to offset the risk associated with their relaxed approval requirements.
The smallest requirements for borrowing vary from lender to lender. But if you want to know how to get a payday loan approved, bear in mind a few things that will help with any loan application:
Checking your credit rating
Your credit rating is a measurement of your creditworthiness. Something like a barometer of how likely you are to pay back any sum of borrowed money.
A low credit score means that lenders are taking much more of a risk by approving your loan application. People with low credit scores might have no credit history or a poor credit history including missed payments. A good credit rating will improve your chances of getting offered a payday loan. People with good credit ratings will have a history of borrowing and making their repayments in full and on time.
Improving your credit rating
Your credit file (which you can pay just £2.00 to access) shows your credit application and borrowing history. It is worth checking this, to ensure that the recorded information is accurate. Any mistakes on your credit file could affect your application.
You will also want to ensure that you get registered to vote and on the electoral roll. These allow lenders to confirm your identity and address. Moreover is one of the quickest ways to improve your credit score if you are not already registered.
It may take up to 8 weeks for your credit file to get updated, once you have registered to vote.
Ensuring that you meet the payday loan lending criteria
Though some lenders trade under different brand names, there are still many different loan providers on the market.
They all have their own product offerings and credit requirements. Which means that shopping around could help you to find the best payday loan to meet your needs. If you apply without meeting the criteria for a payday loan you can be certain that it will not get approved.
To get the best chance of getting your payday loan approved you must meet the following requirements:
1. Meet the basic loan criteria
Payday loan providers will, first of all, assess your circumstances for risk of non-payment. As such, almost all lenders will need you to be in employment. Also, a UK resident and have a UK bank account in which to pay the money into and recover loan repayments from.
2. Meet affordability criteria
You should take a close look at your personal finances. And make sure your net income minus monthly expenditure leaves you with enough income. Also including rent, food, travel, credit and any other regular expenses.
3. Not to be in a situation where you have an increasing amount of debt or long-term financial troubles.
If your personal debt is growing it is unlikely that a lender will be confident in lending more money to you. If your debt levels have become unmanageable, a high-cost, short-term loan may not rectify the problem. In fact, it could exacerbate it.
4. Complete the form as well as possible to pass identity, credit and fraud checks.
Unlike many forms on the internet, a short-term loan application form will often need a large number of fields completed. This is so the lender in question can make a good decision on whether to approve a loan for you. If you do not complete the entire form, or take unnecessary shortcuts, it may raise flags of concern. Thus prevent your application from getting approved. When you might actually pass the criteria had you completed to the best of your abilities.
5. If you have existing payday loans, pay them off first.
Lenders avoid situations where a customer may potentially reach a cycle of debt. Taking one loan to pay another loan is not a good idea.
Shopping around for a payday loan
It is important to shop around before making any applications. Check out our article about ‘Which payday loans are the easiest to get?’ Applying for a loan, even if the application is not approved, can affect your credit rating. And it can reduce your chance of approval for future loan applications.
Before applying, look into the least requirements and ensure that you meet the criteria. A payday loan comparison site, or a payday loan broker, can help with the process of shopping around.
Cash Lady will send your application to approved and trusted lenders and finding the loan that is most suitable for you. This means that you do not need to further damage your credit rating, by making dozens of applications on your own. You will also save time, as you will only need to complete a single form. And you will not need to check the lending criteria on various individual websites.
Having a good reason to borrow money
Some payday lenders will ask for details about the purpose of the loan. Why do you need the money? What will it get used for?
Whilst providers of payday loans are less likely to ask this than traditional loan providers, it may be a question that you will answer.
Payday loans should only get used in emergencies, to cover temporary cash shortfalls. You should be confident that you can repay the debt in time. Either as a one-off payment or by instalment if allowed. If you are applying for a loan for an indulgent shopping trip, a holiday or home improvements, you are less likely to succeed.
Only applying for what you need
If you need a £200 loan, you may get tempted to increase this to £250. If you are having a difficult month, it is understandable that you might want to be able to afford a few luxury groceries. Bear in mind that you are more likely to get approved for a smaller loan. So that extra £50 could tip you from acceptance to rejection.
Before deciding how much money you need, seek to reduce spending anywhere that you can. You could shave £50 off the required loan amount. Do this by purchasing cheaper food or budgeting for a half tank of petrol rather than filling it right to the top.
By applying for the smallest loan possible, you can increase your chance of approval.
You will also end up paying less interest, which will put you in a stronger financial position through the months that follow.
Providing valid documentation
Most payday loan applications get processed online. Which means that there are no phone calls involved and no paper documents required.
In some cases, they may need extra information to confirm details or check financial status.
Before getting a loan, check you have available the proof of eligibility that might be requested. This can include a wage slips, bills, and personal identification.
Account aggregation & monitoring
Some lenders now work with services such as Yodlee, for account aggregation. This means you can provide read-only access to your bank account. Giving lenders the chance to check your income and outgoings for a more detailed affordability assessment.
An extra benefit of an account aggregation service is that it allows lenders to track your ongoing financial situation. They may be able to step in and help. More so if you are experiencing financial difficulty, or could delay the collection of a repayment if your salary gets paid late.
Considering a guarantor loan
If you have a poor credit rating. Or if you do not have steady and reliable income, you might find payday lenders will not provide the funds you need. In these cases, you may wish to turn to a guarantor loan.
Applying for a guarantor loan increases your chance of approval. Because your loan will get backed by someone else. If you cannot find how to get a payday loan approved, you may wish to ask a trusted friend or a family member to act as your guarantor. Guarantor loans are similar to payday loans. But they will likely have a lower APR as a reflection of the reduced risk involved.
If you cannot afford your loan repayments, the lender can request the money from the guarantor that backed your borrowing. This gives them a second opportunity to collect the money owed. Usually from somebody in a better financial position. The requirements for a guarantor are stricter than the requirements for a borrower. Guarantors are usually required to have a good credit rating and/ or own their own home.
If you are thinking about how to get a payday loan approved. Then the most important thing to take away is that you should not rush your application.
Although emergency situations cause people to apply as quick as possible. Taking your time might help you to increase your chance of approval.
You should check your credit rating and review your credit file details to check the information is accurate. Doing so will alert you to any issues which should get resolved beforehand.
This is also a good opportunity to look for signs of potential fraud.
You will need to check you meet the lending criteria of a borrower, before sending your application. Otherwise, you risk wasting your time and damaging your credit file .
Making use of a loan broker service is a good idea. Such as the service provided by Cash Lady. You can find payday loan providers without visiting each website.
Remember to only borrow what you need and to have a good reason for borrowing. Before applying, take time to check your requirements. And to cut expenses wherever you can. The smaller the loan value, the more chance you have of an application approval.
It helps to have financial documents to hand before you start applying. Look for your budget, bank statements, bills and other useful documentation. Especially the last 3 months.
Finally, if you are struggling to find a loan or a loan provider willing to lend you the money. You may wish to consider a guarantor loan as a payday loan alternative.