7 Common Reasons Payday Loans are Rejected
7 Common Reasons Payday Loans are Rejected
Going into debt for the purpose of investing or to solve a temporary liquidity problem is far from rare. It is absolutely not a sign of poor judgment or some other failure. However it certainly can indicate those things. Big successful businesses, investors, entrepreneurs, and ordinary people choose, advisedly, to accept debt for strategic reasons.
However, not all of us can afford the most ordinary financial products. And sometimes, persons of modest means might benefit from taking a payday loan. Payday loans are notoriously risky. That means, if your finances are in need of a quick shot in the arm, it’s important to make the decision to take a payday loan very seriously.
The key is to make sure you can pay the loan off quickly and completely. If you’ve been turned down for a payday loan, it’s a sign that your finances are in need of medical-like attention. That said, here are 7 reasons payday loans are rejected.
7 Common Reasons Payday Loans are Rejected
1. Too Many Outstanding Payday Loans
This is one of the most vexing reasons payday loans are rejected. Payday loans are relatively small, compared to other loan packages. However it does not mean they are meant to be taken lightly. We’re not exactly sure how it happens but some people have gotten themselves caught up in a vicious cycle of living on payday loans. Mark our words when we say, this is bad news.
Some payday lenders are all too willing to extend loans to people who cannot afford it. Those who are turned down are the lucky ones, and they should be counting their blessings. This is why we’re writing this. If you try to take a loan that you cannot pay back you are your own worst enemy. And there are payday lenders who are more than happy to get you on that financial fishhook.
Payday lenders will turn folks down if they;
- have other payday loans they are currently repaying
- are using the payday loan to repay another payday loan
- have taken out one or more payday loans in the last 90 days
If you encounter a payday lender who turns you down for having too many loans active already- you should bookmark their website. Write their address in your Rolodex and go back to them when your finances are in order because they are acting responsibly.
2. You are Unemployed
Okay, this is pretty much a no brainer. Any financial service business has got to assess every person they extend loans to for their level of risk. If you have no job, or no income- that’s not a good sign. Payday loan providers, almost without exception, expect their money to be paid back quickly. Usually they expect it back within two to four weeks. If you haven’t got a job- even if you’re about to be hired- you’re not going to start earning soon enough to pay the loan back on time. Even when money is sure to start coming in, this is still one of the first and biggest reasons payday loans are rejected. It is a sign you need help paying your bills.
It’s a tough situation. It feels like a catch 22. You don’t have money because you don’t have a job. You can’t get a loan because you don’t have an income. The fact is, you’re probably going to have to look elsewhere. Charitable organizations might help you out. You could turn to family, friends, a church, or your local social services department. At the end of the day, taking a loan when you have no income is a bad idea. It’s like digging yourself into a hole and throwing the shovel out.
Your best bet is to go into full-on austerity mode. Sell some things, cut subscriptions, couch surf- and find gainful employment asap. Frankly- if you’re unemployed loans of any kind are probably the last thing you need.
3. You have a Bankruptcy
If you have a bankruptcy on your record, are receiving government benefits, are primarily a freelance worker or for whatever other reason don’t have a regular consistent income- you will probably be turned down. Even if you make a decent living most of the time, a payday lender will be uneasy. After all, you probably wouldn’t be applying for a payday loan if you were not experiencing a financial dry spell. So it stands to reason that this is one of the most common reasons payday loans are rejected.
Even if you expect to get paid for wages withheld for whatever reason, (maybe you’re a government employee and your dept. has been shut down temporarily), you might not get paid quickly enough to pay off the loan on time. Remember, payday loans are one of the most short-term financial products available. Almost without exception, they must be repaid within two weeks to a month.
Listen, we understand that some employers count on the fact that the little guy has little chance of getting anywhere when he complains about how he’s treated. Even if you are owed money and have been mistreated, fighting back takes time and resources. Unfortunately, payday lenders are more interested in avoiding risk than they are in helping downtrodden workers. There are some cases where you can get a loan after a bankruptcy, but we like to caution to take it slowly.
If you have an income stability problem…
Having an income stability problem, your best move is to find a more regular and predictable source of income. If your current employer has trouble keeping the payroll account at payout capacity, or if their payroll dept. has a habit of dropping the ball- you should get another job. Employers who are not able to pay their employees on time don’t deserve you. If you’re worried about damaging your employability- just remember- worthwhile employers would not look poorly on your decision to leave a job that regularly failed to pay on time. To the contrary- they would respect it.
4. Too Many Recent Over Drafts or You have Made Payments to Gambling Organizations
Yet another no brainer. Too many recent overdrafts are a serious red flag for any lender. Likewise, if you’re the sort of person who regularly gives money to gambling organizations on the premise that they MIGHT give you more in return- then you look like a hot mess in the eyes of any lender- payday lender or otherwise.
Spending your time and money with gambling outfits is pretty much a commitment. Financial service providers are in the business of minimizing the gambling aspect of the money lending trade. Lenders know all too well that every loan they make is a risk, a gamble. This is one of the most unexpected- yet surprisingly common reasons payday loans are rejected. Lenders are not going to get terribly excited about lending to a proven gambler.
There’s just no way to put this more clearly. If you’re a gambler- forget about getting loans, unless your a wealthy poker celebrity. Worse still, if you have a lot of cash loans bad credit is probably haunting you.
5. Over-applying for Loans
No matter what type of financial service you are seeking- payday loan or otherwise- if you have a history of overdrafts and making late payments, your chances of approval are small. Getting denied fast payday loans is a sure-fire way to dig that hole even deeper, and one of the biggest reasons payday loans are rejected.
Responsible payday lenders cannot extend their services to anyone who they deem unlikely to default on their payments. The reasons for this are a little deeper than most people tend to assume. First of all, they have a responsibility to their employees, their families, and themselves to make sure their business is viable, sustainable, and profitable. Second, if they have shareholders, they are simply not allowed to make business decisions that hinder or damage the profitable status of their business.
In other words, if you have a poor payment history and apply for yet another loan- you are essentially asking the lender to damage the value of their enterprise. Looking at it that way, there’s no need to take rejection personally. Having small cash loans rejected is not the end of the world. Getting accepted when you can’t afford a loan is much worse!
Once again, if you find yourself turned down because of a poor payment history- the last thing you need is more dept- especially debt that must be repaid quickly. What you need to do is seek financial counseling and make some major changes to your spending and earning habits. It might be an uphill battle, but in the end- the payday lender who isn’t looking to bury you when you’re down is a good lender.
6. You Don’t Have a Checking Account or Don’t Meet the Minimum Requirements
Before going down to your local payday lender, or going online to apply, you should check to see that you meet the basic, minimum requirements. Failure to do so is one of the first reasons payday loans are rejected. To legally receive a payday loan you must be of age and meet the applicable residency requirements. Remember, applying for payday loans with bad credit can affect have even more of a negative effect– so applying for a loan that you have no chance of being approved for is not a terrific idea.
If you do not meet the minimum requirements and walk into the office of some lender who would lend to you anyway- both you and the lender are asking for trouble. This is why we are having this little talk, after all- because if you get approved for a loan that you should not be approved for- well… we’re back to our digging a hole analogy.
Remember, the average interest rates on payday loans are higher than other types of loans. Knowing that, you should be able to calculate for yourself whether or not you can pay off your loan. If you can’t pay back a payday loan on time- you don’t need the loan. And if you don’t meet the minimum requirements, you wasting your time and the lender’s time.
7. Your Salary is in Cash Are Payday Loans Worth it?
It wasn’t that long ago that we dreamed of a cashless society. Wouldn’t it be great, we said if we didn’t have to handle paper and coins that have been touched and pocketed by who knows how many dubiously bathed people? Well, dream no longer, folks, because that day is upon us. Sure, cash may still be around, but it’s quickly going the way of the dodo bird- and it’s a leading reason why payday loans are rejected.
We remember when people in line at the grocery store would groan when someone ahead of them pulled out a card instead of cash. But today, it’s the norm. In fact, many vendors will not even take cash anymore. They only want to deal with people who have it together enough to have a bank account and to be able to track every transaction they make.
To put it bluntly, people who pay cash are not looked on favorably. For one thing, we don’t know where the cash is coming from. If you take cash, are you doing business with a drug dealer, a car thief? We don’t know. This is so much more the case with payday lenders. To put it bluntly, they have a lot of shady people coming into their offices off the streets. They do not want to get into a situation where they find out later that they have been doing business with a small-time criminal. The liability could be enough to ruin their business.
That means, even though you’re probably a responsible person if your main source of income pays you in physical money- few payday lenders are going to shy away from working with you.
So what to think about it?
At the end of the day, once again, this is really for your own good. Why? Because cash payments don’t often get tied to your credit score. That means if you’re trying to improve your credit score by making timely payments- doing it with cash might not even help your credit score.
One way around this is to deposit all of the cash payments your employer makes to you into the bank before spending it. As long as your income is sufficient and regular- this might not affect your ability to access a payday loan. However, if the only way you have to pay is with cash- few financial services providers will be willing to work with you.
The unpleasant fact is that they will prejudge you- poorly. So just run your money through a bank- and if that’s above your capabilities- than some kind of financial rehabilitation is probably what the doctor ordered.
The Bottom Line for Quick Cash Loans
Payday loans are not for everyone. Unfortunately, there are too many such lenders out there who are all too willing to take advantage of people who are not financially savvy. Our advice is to know ahead of time whether or not you have a good chance of being approved. Only accept a payday loan if you need it and know you can pay it off in a timely fashion. Short of that- financial rehabilitation is probably the thing that most payday loan seeker are in need of.
About the Author: DL M
The author has 21 years of professional writing for print and online media with 10+ years experience as a freelance fiction editor. Though he writes about personal finance and money relates topics he also delves into other topics of interest. His subjects include: current events, marketing, analytics, personal development, leveraging social media, SEO, business development, cloud computing, language, and politics.
His interest in culture and politics has allowed him to publish stories that would be challenging to a mainstream audience and have helped him to carve out a small niche for himself in social media and finance.