Common reasons for being declined a payday loan include a low credit score, insufficient or irregular income, errors on the application, inability to verify income, outstanding payday loans, or bank account issues.
Many borrowers turn to payday loans because they may think it’s their only option if they have a poor credit score. However, options like CreditNinja’s personal loans are an alternative to traditional payday loans. A few unique benefits of CreditNinja’s installment loans are that they offer manageable repayment terms, steady monthly payments, and may offer same-day funding up to $5,000.*
If you’re saying, ‘I need a loan but keep getting declined,’ this guide will explain how CreditNinja might be able to help and what options could increase your chances of approval.
Common Reasons for Loan Declines
As mentioned earlier, a few common scenarios in which you may face a payday loan decline. It may be helpful to keep in mind that these scenarios can also apply to other loan options as well.
We’ll go over each—low credit score, irregular and unverifiable income, incorrectly filling out an application, having outstanding payday loans, and bank issues—in detail so you can better understand a decline and work to fix it if you want to move forward.
Low Credit Score
While payday loans are considered bad credit loans, there are still some payday lenders that may take a look at your score to determine eligibility. Low credit borrowers are considered high risk, and so the lower your score, the more risk you pose to the lender. An extremely low score may be too risky even for some payday lenders. Improving your credit file over time can help increase your odds of approval.
Irregular or Traditionally Unverifiable Income
If you don’t have a consistent pay schedule or if your income can’t be proved with documents like paystubs, then it may be hard for lenders to gauge whether you can pay them back. Payday lenders view irregular or traditionally unverifiable income as riskier because it indicates potential financial instability. The best thing you can do in either of these situations is to provide as much transparency as possible, documents like taxes for the past year can help show lenders your ability to repay the loan.
Incorrectly filling out a loan application
One of the most common mistakes that people make when filling out a loan application is entering in their personal information incorrectly, this can include their social security number, date of birth, address, and even name. Along with personal information, a few other mistakes include adding inaccurate income information, having inconsistencies, and not submitting the right documentation, which can all mean denial. It’s important to not only review your application but also take a detailed overview of your finances for things like an accurate number on your take home and gross monthly income, your credit report, your debt-to-income ratio, etc. before you apply.
Having Outstanding Payday Loans
Having multiple outstanding payday loans or existing loan payments can sometimes lead to denial. For lenders, a borrower having multiple short-term loans poses a much higher risk of default. And so, for your best chances of approval, you’ll want to make sure that any other payday loans you have are paid off. Other existing debt payments may also impact loan approval.
Bank Account Issues
Many payday lenders will require that applicants have an active bank account. This is usually because that is how they send the funds after approval, as well as collect funds when they are due. Payday lenders aren’t the only ones either, many lenders require an active bank account, so keep that in mind when trying to borrow money.
How To Increase Your Choices of Getting Approved
To increase your chances of getting approved for a payday loan you should make sure that you have the correct documents you need, review your financial information (i.e. your credit report, score, debt to income ratio, etc.) beforehand for the most accuracy, provide the right documents, choose the right lender, improve your credit score (if you have time), and double-check your application. While we briefly discussed some of these solutions, we’ll go over them in more detail below.
Provide the Correct Financial Documentation Requirements
Preparing documents beforehand will ensure a smoother application, here are some of the documents that most payday lenders will ask for include the following documents:
- Government-Issued ID — a driver’s license, passport, or state ID should suffice.
- Proof of Income — Pay stubs, letters of income, tax information, etc.
- Bank Account Information
- Proof of Address — bank statements, acceptable pieces of mail, etc.
- Social Security Number (SSN) or Taxpayer Identification Number (TIN)
- Employment Verification
- Recent Bank Statements
Choosing the Right Lender
Another way to improve your chances of approval is to choose the right lender. Some lenders are more flexible with certain situations than others. If you don’t have the most traditional finances, choosing those more flexible lenders can increase your chances of approval.
Improving Your Credit (If Time Allows)
If you have some time before you need to borrow funds, then improving your credit score may be an option. With a better credit score, you’ll not only have more lenders to choose from but you’ll be able to find more affordable loan options such as personal loans. An easy way to start improving your credit history with all three credit reporting agencies is to pay your bills on time.
Always Double Check Your Application
Before you submit your payday loan application, you should double-check all the information you provided. Any mistakes or inconsistencies can lead to loan denial.
Alternative Loan Options
While payday loans may seem like a convenient option when you have poor credit, they have several downsides including the cycle of debt that they often lead to. The good news is that there are lots of alternative loan options and financial institutions out there, even if you don’t have the best credit history. Here are some options you can look into:
- Online Personal Loan Lenders — There are lots of personal loan lenders online that you may qualify for a loan despite a poor credit score.
- Credit Unions — Credit unions are not-for-profit institutions that may provide flexibility and savings for their members. Unlike banks that focus on profits, credit unions focus on benefits for their members. Rather than a payday loan, you could consider one of these which will likely be less expensive and offer more manageable repayment.
- Secured Loans — These loans have an asset as collateral. This asset can be a home, car, or other valuable. As long as you make your monthly debt payments as stated in the contract and finish paying back the loan, you should get the asset back. Sometimes secured loans can mean more funds than payday loans and a much longer time for repayment.
CreditNinja Installment Loans
CreditNinja’s installment loans are available for borrowers who have poor credit scores, similar to applicants who apply for payday loans. However, instead of having to repay the loan in as little as two weeks, loan terms with CreditNinja can range between four and 24 months. Making things more manageable. We also offer loans up to $5,000, which is much higher than what most payday loans offer. There are never any hidden fees and funding can sometimes be same-day.*
Co-signing and Joint Applications
One last option that you may want to consider is getting a cosigner or co-borrower. A cosigner or co-borrower is another person with a good credit history that you can ask to be added to loan applications to improve your odds of approval.
While both a cosigner and co-borrower act as security for the lender and the loan will impact their credit report and history, their roles are a little different. A cosigner won’t be the one making the primary payments (as long as you are able to repay your loan), while with a co-borrower, or a joint application, the other party will make payments alongside you. Joint applications are usually done with people who share household income such as between spouses or a parent and child.
While these options can be helpful during financial challenges, they can have long-term impacts on both your finances and the other party involved, depending on how repayment goes.
How Can CreditNinja Help?
If you are considering a payday loan, CreditNinja may be able to help, with an alternative. Our personal loans are made for poor credit borrowers and offer more manageability than payday loans. To get started simply head to our website and begin an application!
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