According to CareerBuilder.com, an astounding 78% of workers within America live paycheck-to-paycheck. If you’re among the workers living paycheck-to-paycheck and haven’t yet had a chance to build up an emergency savings fund, you may find yourself in need of quick cash the next time your car breaks down or a family member has a unexpected pressing medical need.
Payday loans are one avenue many individuals consider when an emergency arises. Although payday loans are easier to qualify for than personal loans, a person isn’t guaranteed to be approved for one.
10 reasons a payday lender might decline an application
If you’ve ever been denied for a payday loan, it’s helpful to know why. Below is a list of the most common reasons a lender may reject your payday loan application.
1. You don’t meet the application requirements
Every lender has a set of minimum requirements each applicant must meet. Typically, the lender will only accept applications from individuals who are 18 years of age or older who are also citizens of the United States. Sometimes lenders have a higher age requirement of 21.
2. You can’t prove your income
In order to get approved for a payday loan, you must be employed and have a paycheck. The lender isn’t going to take your word for it either, so you’ll need to produce a few paychecks or a bank statement showing direct deposits made from your place of employment as proof. Some lenders may be willing to accept Social Security as income; however, a great number of them will reject those who are self-employed or working as independent contractors, as well as any applicants who are employed by a temporary employment agency.
3. You don’t make enough money
Even if you have a job and can prove your income, it doesn’t mean you make enough to qualify for the payday loan. Some lenders require applicants to bring home at least $800 a month. Sometimes welfare and unemployment income are considered, as long as there is also additional income that puts you over the lender’s minimum income requirements. It’s a good idea to make sure you meet this criterion before you apply.
4. You don’t have a checking account
Payday loan lenders often require borrowers to leave a post-dated check with them or fill out an ACH withdrawal for repayment on the due date of the loan. If you don’t have a checking account, you wouldn’t be able to do this and your application would be denied.
5. You have outstanding payday loans or paycheck advances
If you have any outstanding payday loans or paycheck advances, a lender will be leery about granting your application. This is true whether the loans or advances are current or past due, as another payday loan would only further increase your debt.
6. You have blemishes on your accounts
Should a payday loan lender notice a series of overdrafts on your bank statement, he or she may choose not to grant your application. The same is true if a credit check is performed and a bankruptcy shows up on your report. These blemishes indicate that you are more of a risk and may not be able to pay back the loan.
7. Your credit history is poor
While not all payday loan lenders run a credit report, some do. If your credit score comes back poor, or your debt-to-income ratio is unfavorable, the lender may deny your application.
8. You don’t meet the lender’s additional requirements
Some lenders have a few general requirements for applicants, while others have a much longer list. For example, there are payday loan lenders that ask their borrowers to have access to a fax machine and provide a working telephone number. They may also request proof of residency. While your application may be denied with this lender, it may be approved by another with less strict qualifications.
9. You make payments to gambling sites
If a payday loan lender scrutinizes your bank statement and notices that you’ve made payments to online gambling sites, they may reject your application. The lender may conclude that instead of paying your bills, your taking chances with your money by gambling, and may end up not having enough to repay the loan.
10. You’re being discriminated against
Unfortunately, discrimination still happens. It’s important that you review all of reasons for denial listed above and make sure you don’t fall into any of those categories before you consider discrimination as the reason for your rejected application. If, however, you feel that the payday loan lender has discriminated against you based on your race, religion or disability, you can file a report with the U.S. Department of Justice Civil Rights Division.
Denied a payday loan? It could be a blessing in disguise
Payday loans are dangerous, as they often leave borrowers in a vicious cycle of debt. According to The PEW Charitable Trusts, the average payday loan borrower takes out a total of eight loans per year of about $375 each. These loans come with a total interest payment of $520. That’s almost two whole loan payments. It’s no wonder borrowers have a hard time paying back the loans.
WebMD reported on a study that was conducted by the American Psychological Association. It revealed that 73% of survey takers feet a significant source of stress when it comes to money. If you can’t qualify for a payday loan, you’re probably better off financially and mentally without one. When times are tough, consider getting a temporary second job, selling a few non-essential items or asking friends and family for a little help until you can get back on track.