Business

What Kind Of Checks Are Carried Out For Payday Loans?

Payday loans are short-term types of credit, borrowers prefer during an emergency financial crisis. It is the last alternative because payday loans are highly expensive and you need to pay as soon as you get your next salary amount deposited into your bank account.

All major payday lenders in the UK including LoanPigs perform a credit check as per the FCA rules. Therefore a person looking for a lender without credit checks is impossible. Can payday loans online bad credit situation help borrowers find a lender? 

Lenders evaluate bad credit situations differently. Some have bad credit yet are sinking into a debt trap, while a few with bad credit are trying to enhance their credit score by successfully paying delayed debts on time. So, even with bad credit, there are lenders like PM Loans who will match you with some suitable lenders. The lenders can adjust the necessary amount and duration, which makes it more flexible and affordable for borrowers with not-so-good credit scores to pay.

Basic checks 

  • Borrowers’ age has to be 18 years and more.
  • The borrower has to be a full-time resident of the United Kingdom.
  • Have a consistent and stable income from self-employment, full-time or part-time job.
  • A valid UK mobile.
  • A valid bank account in the UK.
  • UK’s email address.

Payday loans are short-term unsecured loans. It means you don’t need collateral or a guarantor to get approved for the loan.

Payday lenders still consider loan applications with bad credit scores or loans with IVAs, CCJs, and bankruptcy. 

Affordability checks

In affordability checks, the lenders verify that the amount you desire to borrow is payable with the next salary paycheck. Lenders are giving the amount without any collateral, so need to ensure that they don’t fall into financial issues due to the unaffordability of the borrower to repay their loan. 

You have to share information about your income and expenditure every month in the loan application. It allows them to evaluate how much you afford to borrow without any stress. They will compare your income against monthly expenses, outgoings, and existing debts. You may have to provide bank statements or pay slips to confirm affordability. During the underwriting process, the requested loan amount can be adjusted to fulfill the affordability needs.

Credit checks

Credit ratings are checked before approving your payday loan application. The lenders use information from the UK’s three major credit reference agencies – Equifax, Experian, & CallCredit. Lenders receive real-time details, which offer them a deep understanding of your debt repayment history, recent loan applications, credit card details, and outstanding debt details [if any]. 

The credit checks lenders run on your account or name does not damage your overall score. In general, a credit search footprint always appears, if the search is conducted and resides there for one year. It is information that helps other lenders to gain an insight into whether the borrower has generated an unusual percentage of credit searched within a short time. It can damage their credit score because abnormal credit searches reveal your desperation for money. 

If you are a repeat customer, then the lender will consider your future payday application.