If you are finding the month too long and your bank balance too small, you might be considering a temporary loan to get you through until payday.
If you don’t have an emergency fund, or a credit card to use, one alternative might be a payday loan.
Payday loans are far more accessible than normal high street credit facilities and are designed to bail you out in times of financial need, for a short period only.
If you have been refused credit in the past, or perhaps simply want to learn more about the eligibility criteria, this guide explains what you need to know.
Bad credit history?
The economic downturn in recent years, provoked by the near collapse of the banking industry, has led to an overall tightening of finance criteria as lenders have become more wary about granting credit.
This has meant that an increasing number of individuals, perhaps with only minor indiscretions on their history, have been unable to borrow money.
However, the payday sector is set up slightly differently and focuses less on your financial past, and more on your current ability to repay. Therefore, even if you have some black marks on your credit file, you could still be able to get approved for a payday loan even if you have been declined by a mainstream lender.
You could still be able to obtain a payday loan even if you have had more significant problems. County court judgements, often referred to as CCJ’s, will present an immediate barrier to most types of finance. But because payday loans are specifically designed to help those who may have had some financial difficulties in the past, you could still be eligible.
Credit searches can sometimes make a bad credit rating worse by logging an entry on the file. The majority of payday loans are available without a credit check which means that not only will you not be refused based on your past, but your current score won’t be adversely affected either.
What criteria must be met?
Just because payday lenders are willing to be more generous with the way in which they assess applications, it doesn’t mean that everyone will be automatically approved.
Every lender will operate their own approval policy but there are some general rules which apply across the board. These are as follows:
- A permanent resident of the UK
- Aged at least 18 years of age (some firms stipulate 21 as a minimum)
- In paid employment. Many lenders have an entry level salary requirement, below which they will not provide finance, typically around £500. Some lenders also specify that you must have been in paid employment for a period of time before applying, usually three months.
- You have a bank account in the UK which provides a debit card. This is the account you must use for payment.
In addition to the above requirements, just because a credit check is not carried out does not mean you will be allowed to borrow money you will not be able to repay. Payday loan providers complete affordability assessments which check that you have the disposable income in order to be able to meet the repayments. This assessment is carried out very rapidly so you will not find the process drags as a result.
What happens next?
Once you are approved, the lender will let you know how much you can borrow. If this is your first loan, the chances are you will only be granted a very small sum, often around £100. This because by providing finance without a credit check, there is an element of risk for the lender. Once you have proven that you have the means to repay on time, subsequent loans may be granted for a higher sum.
Many payday lenders pride themselves on the speed in which they can process an application. Although the exact sequence of events will vary between lenders, in most cases the funds can be in your bank account within a matter of hours, if not sooner.
Payday lenders can offer a much-needed solution to help you survive months where there’s simply not enough money to go around. Tiding you over until payday, you escape the misery of trying to get by without any cash, and with no long-term commitment either; simply repay what you owe when you get your wages.
You may have discounted the possibility of getting finance if you have been declined in the past, or perhaps have had recent money problems. However, as payday lenders assess your application very differently without relying on your credit rating, providing you can tick the above eligibility boxes, the chances are you will be able to get a loan.