Payday loans are unsecured loans, usually used to meet immediate financial needs. An unsecured loan does not require a guarantee or mortgage to make use of it, either with banks or fast loan platforms. As no collateral is required, banks impose higher interest rates to mitigate the risk of default on the payday loan.
Being a good option for convenient monetary help and without online problems, payday loans are granted based on your credit worthiness. Your employment status and income help determine if you are able to pay the loan installments on time. The amount of the payday loan together with the interest rate is calculated for the entire tenure and, in case you wish to cancel the loan before the end of the term, a prepayment fee is normally applied. The duration of the refund could range between 12 and 60 months, depending on the bank or financial institution. Payday loans can be requested for vacations, purchases, celebrations, home renovations, medical services, purchase of a smartphone or purchase of a vehicle.
Whatever your reasons for applying for a payday loan, it is possible that the loan application will be rejected. The rejection of payday loans is taken more negatively compared to loans guaranteed by credit agencies. Let’s look at the 4 reasons why banks may reject your payday loan application.
Failure to comply with any previous or concurrent loan fees, failure to pay with a credit card or if you have never used a loan before could lead to a poor credit history.
Credit bureaus maintain your credit history provided by banks or credit card companies. When you apply for a payday loan at a bank, your credit history report is sent to the bank that reviews it before making the decision to approve or reject your loan application. A credit history is preferred as high as possible.
The banks also look at how much time has passed since the last time you failed to meet your payment obligations. For example, if you did not pay your credit card bill on time about 6 years ago, then it’s fine compared to a default 3 months ago.
If you have never used a loan before the bank has no indication of your past loan payment behavior.
Requesting several credit cards or payday loans at different banks within a short period of time and getting rejections later suggests that you are desperate for cash and this will be reflected in the negative credit report.
To make sure you do not face rejection due to bad credit history, always pay your installment or credit card bills on time. Do not fully use your credit limit, using up to around 70% as much. Also make sure you do not spend more than the credit limit. Check the status of your loan installments in case you are a co-applicant or guarantor of a loan.
If your monthly income is insufficient for reimbursements of monthly installments, banks may reject your loan application. The bank’s eligibility criteria generally require that you have a minimum income to be eligible for the payday loan.
Before submitting your application, you must know what the minimum monthly income threshold of the bank is and do not make the request if your monthly salary does not meet the bank’s minimum income threshold.
A stable job is what they look for in a payday loan applicant. The minimum expectations that banks have range from 6 months to 2 years in the same organization. Unstable employment or insufficient employment history can make banks doubt your ability to pay. The probability of rejection is high if you are a temporary employee or in a probationary period.
The banks also look at what industry you are employed. In case you are associated with an industry that is going through a recession or continuous layoffs, banks may reject your application.
Make sure you are not currently paying multiple fees for multiple loans. This may be a good reason for bank refusals to your request. If these multiple loans indicate that you have debts, then it is easy for the bank to reject your application. The banks want you to have enough balance in your account to spend on daily expenses, top-ups of public services, etc. Pay the loans you already have before requesting a new one.
The total amount of monthly payments must be less than 50% of your monthly income. There is no defined maximum number of payday loan installments dictated by a bank, but most banks may be less willing to offer a loan if you already pay more than 2 or 3 loan installments each month.
Before applying for a payday loan, you must access your requirements carefully. If your need for funds is small, try to make arrangements with non-bank sources. In general, if you request a payday loan as low as 500 Euros then it will be rejected because the assumption is that your financial situation must be under heavy stress so that you need such a loan. The bank will also doubt your ability to pay. In case you need this amount, we recommend you apply for quick credits.
Contact the bank through your customer service to first know what the smallest loan amount available before submitting the application.
Checks without funds, the average daily balance insufficient, the salary not credited on time each month are some other typical reasons for rejection of a payday loan. But I could reject your loan application if :
In Prestamospersonalesnet you have the best tips to apply for payday loans quickly and easily. Increase your chances of payday loan approval by not having multiple loans at the same time, be on time with payments and keep your credit history healthy.