Getting a payday loan is becoming increasingly popular among people who need a little money to tide them over during an emergency. These short-term loans are designed to be repaid weeks as soon as you get your next salary.
Some private payday lenders allow clients to arrange to pay off a loan in weekly, fortnightly, or monthly installments. The average maximum repayment window on a payday loan is three months, and this only applies if you borrow over an amount that the lender specifies. Here is what it takes to get approval for a payday loan:
Many lenders now offer payday loans online, a welcome opportunity for potential clients who do not live near one of their branches. Going online makes payday loans more accessible for customers and reduces operating costs for lenders who no longer need to rent multiple branch offices.
The move online has forced payday lenders to up their game as it has introduced much competition into the market. Companies can no longer rely on the monopoly effect they achieved by having offices in some geographic regions.
The application process is straightforward and simple, making it easy for anyone to put their payday loan plan into action. Most sites have an online form that applicants should complete in detail.
Additionally, potential lenders need to submit supporting documentation that the lender uses to determine the application’s success or failure. Some applications are approved within a matter of minutes, provided all forms are complete and documents submitted.
Payday lenders need several documents to verify your application and assess your ability to repay the loan in full timeously. Each site has unique specifications, although there are some standard expectations.
A payday lender needs to verify that you are using your identity. There are so many identity theft cases, and lenders want to protect themselves from fraudulent loans that they cannot claim back from the person whose details were used in bad faith. You will need to prove who you are. This is usually best achieved by supplying a photo-ID document that includes your birth date.
Your birth date is critical as you must prove that you are of legal age to apply for a payday loan. The minimum age for legal responsibility for such a transaction is 18. Some companies only lend to people aged 25 and over.
Check your preferred lender’s age requirements to ensure that you meet them. Lenders might also have a maximum age for potential borrowers, stipulating that they do not enter into loans with people 75.
A legal requirement for payday loans in the UK is having a valid UK bank account. You will need to prove that you have one by submitting a letter from your bank or a current bank statement. Payday lenders do not work with cash, so they need to route the loan amount to a bank account, which must be in the same name as the borrower.
A payday lender wants to ensure that there is every reasonable chance that you can repay a loan. To this end, they conduct an affordability check. This requires you to demonstrate how much money you earn each month. This could come in the form of a salary, pension, or benefits.
Declare your income using bank statements and salary advice slips. Keep documentation that details your annual salary, benefits, or pension pay-out information on hand to submit with your application.
With information about your income, a payday lender can calculate whether you have enough money to repay a loan. If your income is not high enough, you might not get the full amount applied for. Instead, the lender will offer you a smaller loan, one that you can afford to repay according to its affordability calculation.
A potential lender needs to know where they can reach you. Therefore, as part of your application, you need to include a verifiable mobile telephone number and email address. Your bank statement should serve as proof of your address.
Payday lenders must run credit checks on all applicants. However, they are more understanding of less-than-ideal credit scores than other institutions. This makes them popular with customers who have had credit issues in the past.
Unpaid debts reflect on your credit rating, pulling your score lower each time you fail to pay. A low credit score is a red flag for conventional lending institutions, such as banks.
Payday lenders prefer to take a more pragmatic approach, reasoning that a credit rating of past financial behavior is not necessarily an accurate predictor of future actions. They might insist that someone with a better credit score signs as a guarantor on the loan. If you have a poor credit score, use a payday loan as a chance to improve it by paying it off timeously.