A payday loan is simply a short-term loan payable on your next payday. The loan enables you to sort out financial emergencies that may arise, such as car repairs, medical bills, and other unexpected expenses. However, although payday loans are easily accessible, you need to fulfill a few requirements for a successful application.
Here are five key requirements when applying for a loan till payday:
#1. Know Where Your Credit Stands
Good credit is fundamental to qualify for a payday loan: high FICO scores and a decent income matter. However, questionable creditworthiness can make them lose their appeal.
You can gauge where your credit stands with a few tips. For example, how often do you pay your bills on time? Not settling your outstanding balance for 30 days will register a negative report in Equifax, TransUnion, or Experian accounts.
Your credit score can also get affected by the longevity of your active credit accounts. This is because FICO takes your accounts and average their ages. Thus, more accounts mean you are experienced and responsible.
With these tips, you’ll know where your credit stands. Ensure your positive financial behaviours are well recorded to credit bureaus. More so, dispute errors that might hurt your credit score.
#2. You Must Be Employed
To get a payday loan, you need to prove to have a steady income. Clients need to have a stable, decent salary. Financial stability indicates that you’ll manage to repay the loan on time. More so, lenders can deduct the amount from your bank account if you don’t pay the loan.
However, some companies lend to self-employed individuals. But these payday loans are hard to come by. Self-employed people need to present tax returns and transcripts. More so, you should provide bank statements, loan collateral, and 1099.MISC form.
#3. Don’t Borrow Too Much
With the economic downturn, it becomes necessary to get financial help from various lenders. However, this can hurt your loan eligibility for a loan in the future. Therefore, most payday loan lenders check your borrowing history to decide whether they will offer financial help.
Too much borrowing raises a red flag. You will be considered a high-risk borrower. With this, you may not get a loan.
#4. Pass Certain Checks
Payday lenders run applicants through various checks. They check the history of bank statements to see if you have dishonored payments. Income paid in cash is also hard to verify. This can also apply to people who receive payments in cryptocurrencies.
Your application should also pass Veritec. This database system uses data about your finances to ensure you can afford the loan. If you fail the Veritec check, it means you cannot meet the minimum requirements.
Veritec check fail indicates that you are delinquent on a loan, have many debts, or have no stable income.
#5. Pay Off Other Loans & Improve Credit
Having multiple debts is stressful. Before sending your application, you must decrease your debt faster and raise your credit score. Start by repaying high-interest debts. Credit card debts are often expensive, and interest adds up pretty quickly.
Next, determine other high-interest rate debts. Choose the ones that cost you the most interest. Then, evaluate those loans with higher interest rates than the principal amount. Repaying these loans free up your money and also boost your credit score.
Finally, pay all long-term automobile loans. Your car loan might not accumulate a high-interest rate, but it takes longer to clear. As a result, long-term loans can be problematic, especially when the warranty period elapses before the loan.
In addition to paying off your debts, there are other ways to raise a credit score. Inaccurate information makes your score suffer. Dispute credit report errors, such as:
- Hard inquiries you never authorized
- Long loan balances
- Late repayments report though you pain on time
- Accounts you never opened
Alternatively, you may hire a credit repair agency to correct credit reports.
The Bottom Line
When applying for a payday loan, ensure it’s from legit lenders. You can have a quick search on yellow pages or Google for the best services.
Compared to banks, payday lenders don’t need lots of paperwork. As a result, payday loans are easier to get, even with a not-well-doing credit score. However, you must meet the above simple basic requirements for approval.