How easy is it obtaining approval for payday loans for poor credit? This is a question that numerous people ask if their credit rating is less than perfect. Well, the good news is that payday loans are one of the easiest types of loans to be approved for if your credit rating is not up to scratch.
Why Are Payday Loans Easy To Be Approved For Than Other Loans?
One of the main reasons payday loans are easier to be approved for is that the sum of money borrowed from a payday loan is small and the loan is not spread out over numerous years.
A typical payday loan is anywhere from £100 to £500, with the most popular amount borrowed being £100. However, the overall average loan amount came in at £260.
As this is a relatively small sum of money and the money is repaid within one to three months, lenders are not taking as big a risk as when approving personal loans and sums of thousands of pounds.
Who Applies for Payday Loans For Poor Credit?
Payday loans are popular with people who have a poor credit rating and who may struggle to find approval for any other type of loan. People from all lifestyles apply for payday loans as this type of loan is one way of getting hold of money quickly and you know within minutes if you are approved. If you are approved, funds from the loan are often paid into the bank on the same day. People take out payday loans to meet an unexpected financial outlay.
Recent figures published by the FCA have suggested that in 2018, 5.4 million short-term loans were taken out and these include payday loans. This has dropped from the number of people who were taking this type of loan out in 2013, which came in at a whopping 10 million payday loans per year.
The report from the Competition & Markets Authority also determined that three out of four customers who have borrowed via a payday loan take more than one loan out per year. The average number of loans taken out over the year is six.
Payday Loans Are Favoured Among the Younger Generation
In 2018, it was revealed that around one-third of all people applying for payday loans were between 25 to 34. This number accounts for 33.4% of borrowers and represents 17.5% of adults in the UK.
It is thought that payday loans are popular with the younger generation as their income is not as stable along with them not having spending habits that are predictable or not having financial experience. Many young people were single and in employment, in rented accommodation and on a relatively low income. 83% of the people taking out payday loans did so online.
What Do People Use Payday Loans for?
Payday loans can be taken out for any reason to cover emergencies when money is tight. They are emergency loans to cover costs when there is insufficient money in the bank to cover a financial outlay that needs to be met before the next payday.
The figures for reasons for applying for payday loans suggest people take out loans:
- To cover expenses that are recurring. Despite the fact that this is an expensive way to borrow;
- 53% of people who took out payday loans did so to pay for utility bills or other living expenses;
- 2% of people who took out a loan said they used the money to pay off another loan;
- 10% of people used the funds from a payday loan to cover vehicle expenses;
- 7% of people used payday loans to purchase general shopping;
- 19% said they relied on a payday loan due to a decrease in their income that was unexpected;
- 59% said they needed to pay for something they could not manage without until the next payday.
Payday loans should in fact only be considered as emergency loans. They do come with a rate of interest that is higher than the typical personal loans and they are only viable providing you can pay off the entire loan as agreed. It is not in your best interest to take out a payday loan to pay off another loan.
Why You Might Not Be Approved For Loans
While the payday loan is one of the easier types of loan to get approval for if you have a poor credit rating, there are instances where you not be approved for loans.
For instance, younger people might not have enough credit history for the lender to make an informed decision about how big a risk you are. As payday loans offer a small sum and you are going to pay it back quickly, the risk is lower so the lender may be more lenient.
If you have taken out other payday loans, the lender may turn you down. Wait until you have paid off the existing payday loan before re-applying and bear in mind that payday loans should not be relied upon from month-to-month.
You have to comply with certain criteria to apply for a loan. Generally, you must have a regular income, live in the UK, be over 18, have a bank account in the UK and debit card attached and be able to set up a direct debit.
Boosting Your Chances of Approval
One of the ways you can boost your chances of approval is to apply for a payday loan with our help.
We are not lenders. Instead, we work with a panel of UK lenders who offer affordable loans and numerous loan options. They take into consideration whether you can afford to repay the loan more than put emphasis on your credit rating.
We can search for payday loans for poor credit with our panel of lenders and if one turns you down, we move onto the next. This means you have to make just one loan application to be able to search with multiple lenders, which boost your chances of being approved by one of them. It also does not leave multiple searches on your credit file, which might go against you.