A payday Loan is a small loan issued by a lender. It is very similar to a short term loan. It has an agreement that the borrower shall pay it back. It’s usually due when they receive their next salary. They are useful to get a small lump sum to cover an unexpected expense. These are typically paid directly into the borrower’s current account.

From the lender’s perspective, these loans are quite risky. Lenders try to compensate for this risk by charging high interest rates. They set certain eligibility requirements when looking at your Payday Loan application.

Are you wondering why can’t I get a payday loan? Your application could have been rejected due to: Your bad Credit score. Lack of regular income. Your gambling habits. Or your existing outstanding debt.

Here we have explored the possible reasons for payday loan rejection in detail.

Why can’t I get a payday loan?

Lenders determine strict eligibility criteria for payday loans. This helps reduce the risk associated with them. They prefer borrowers who have a good credit history. Or a favourable credit score. And/or a regular income source.

If you have a limited credit history, it can be hard to find a credit provider. This can also be true if you have money problems. Have you made a late repayment on a loan lately? Or worse does your credit file show a missed payment? Have you failed to pay bills?

Lenders like to make sure that you can afford the loan. They will undertake an affordability assessment before granting credit. If your payday loan application has been rejected, you could have failed to satisfy some of these requirements. They check all this before paying the short term loan into your bank account.

Here are the most common reasons for the rejection of a payday loan application.

Reason #1: Poor credit rating

If you have a bad credit score, it could be the reason why you can’t get a payday loan. A payday lender will certainly perform a credit check before approving your loan. Lenders inspect your credit report to judge your creditworthiness and your credit score is an important indicator of that.

Responsible lenders will always check your financial history. They look at your borrowing history to see how you’ve managed credit in the past.

They do this in addition to looking at what you put in the application form. If you have a poor credit score, the lender may view you as a risky customer and will reject your loan application.

Credit reference agencies consider your payment history, credit utilisation, repayment habits, and other financial parameters while calculating your credit score. Your credit rating could be poor due to multiple reasons such as:

• Failing to pay loan instalments on time in the past
• Not being listed on the electoral roll
• A bankruptcy declared within the previous six years
• Being subject to a County Court Judgment (CCJ)
• Being a victim of identity theft where a scammer impersonates you to get loans
• Not paying utility bills, credit card bills, and other dues on time
• Any other missed payments

Get your credit report for free from the website of a credit reference agency like Experian. Review your credit report in detail to find out why you have a poor credit score. Do you still have unpaid short term loans? Have you paid your bills late for the last few months? Has anyone used your credit card through identity theft? What exactly is on your credit history?

Once you narrow down the reasons for your poor credit score, take corrective action to reverse their effect. You can turn your credit report into a favourable one by paying your dues on time, reporting any identity theft you noticed, and paying off your outstanding loan balances.

Reason #2: You don’t have regular income

If you are wondering why I can’t get a payday loan, look at your financial situation closely. A payday loan hinges on you having a steady source of income to pay it back. A lender will require you to have a regular source of income to ensure that you have the ability to pay back your payday loans.

You may have been unable to demonstrate that you have an ongoing income source, or your payday lender may have failed to verify your income source.

You can’t borrow a payday loan without demonstrating the regularity of your income. If you are unemployed, look for a job before you apply for your next payday loan. If you are self-employed, try to prove the regularity of your income through your tax documents, financial statements, and invoices issued to debtors.

Reason #3: You already have multiple outstanding loans

If you have observed I can’t get a payday loan anywhere, it’s possible that you already have a lot of outstanding debt to your name. You may have borrowed more than usual due to the rising cost of living. If you’ve borrowed too much money, it can count against you. A lender will consider this as a sign of financial instability.

22% of adults in Great Britain (equal to around 11.5 million people) reported borrowing more money or using more credit because of the increased cost of living between 25 January and 5 February 2023.

Despite this reason, having significant outstanding debt showcases a poor credit history, especially when you haven’t paid your dues on time. This could lead to a payday loan rejection.

List down all the credit card dues, outstanding short term loans, and other outstanding loan repayments and focus on clearing them as soon as possible. Do not try to borrow money again until you clear these dues first.

Create a strict monthly budget and start spending your money according to it. Aim to save as much as you can per month and pay back your loans one by one.

Check out this guide to understand which debt you should pay off first.

I cannot get a payday loan anywhere – what can I do now?

• Find the root cause and correct it: If you are unable to get payday loans anywhere, start by finding out the reasons. Once you narrow down the reason, start taking corrective action to demonstrate yourself as an eligible borrower. Pay off your outstanding short term loans, clear your credit card bills, and take other steps to improve your credit rating.
• Look for alternative options: Instead of chasing behind your payday lenders, you can also consider payday loan alternatives. For instance, you can apply for a short term loan from a reputed direct lender in UK, or if you have a low credit score, you can apply for a bad credit loan instead. Alternatively, you can apply for a credit card with your current bank, or you can become a credit union member.
• Develop healthy financial habits: In order to build a good credit history for your future, start imbibing healthy financial habits. Create a monthly budget to make sure that you are not overspending on anything. Split your expenses into essential and non-essential expenses and focus on reducing your non-essential costs to a minimum. You can start your budgeting journey by following the 50:30:20 rule, where you spend 50% income on essentials, 30% income on your wants, and save the balance 20% for your future needs.
• Build an emergency fund: If you manage to create your own fund for emergencies, you will not need to borrow a payday loan at all. Payday loans seem attractive, but they have pretty high interest costs. Instead of relying on these short term loans for your urgent financial needs, aim to have your own emergency fund that can get you through rainy days.

Summing up

Instead of wondering why I can’t even get a payday loan, start taking corrective action to improve your creditworthiness. Lenders judge your ability to repay their dues by checking your income sources, credit history, credit report, and credit rating. One of the easiest things to do is get on the electoral roll.

In order to borrow a payday loan, you must be able to demonstrate a regular income source and a history of paying back your dues on time. If you’re thinking of taking out credit, consider other loans as well. Payday loans can be expensive, but can help if you’re in an emergency situation.

Once you take steps to clear your existing dues and start to implement good financial habits in your life, you should be able to get credit whenever you require it.

Frequently asked questions

Disclaimer: The information given above is provided for reference only. This is not financial advice.

Related guides:

How to Spot Payday Loan Scams

Short Term Loans vs Payday Loans

Advantages and Disadvantages of Payday Loans

How To Get Accepted for a Payday Loan