Help: I Keep Getting Denied for Payday Loans

One of the most intriguing parts of being a blogger is looking at all the various phrases typed in to find my site. Interestingly, a growing question pertains to getting turned down for a payday loan.

Oddly, this isn’t a topic I’ve discussed here in any depth, so now is the time to put that situation right. So – what should you do if you keep getting denied for payday loans?

Accept Your Financial Situation

It’s no secret that payday loans charge extortionate amounts of interest on any money loaned. The figures often run into the thousands of percent when viewed over a year. The reality is that when looking at the interest rates on offer, there are many cheaper ways to borrow money – such as with a credit card or a personal loan from your bank (assuming they’re managed properly).

Most people for payday loans for one of two reasons:

• Speed – Most payday lenders can make a lending decision within hours, and if you apply early enough in the day then the money may even be with the same day.
• Credit History – Sadly, while payday loans charge plenty of interest they are often the only option when your credit is low.

Getting a new credit card or a bank loan can be touch-and-go due to their careful affordability and credit rating decisions. Payday loan companies, with their higher interest rates, can however afford to take risks with borrowers that more traditional sources would typically decline.

The first step if you keep getting declined for payday loans is to accept that your financial situation is serious. While the answer may not be what you’re looking for, it isn’t the case that you can simply borrow money from elsewhere. Instead this should be a wake-up call that it’s time to make some serious changes to your life and to get your money into order once and for all.

But what should you be doing to recover from your current situation?

Repair Your Credit

If you’re getting turned down for payday loans then at least part of the problem is likely to be your credit record. Perhaps you’ve got unpaid debts on your record, or you’re borrowing more than you earn. Remember, too, that credit records aren’t always perfect, and many people find they’re getting declined for credit based on a mistake on their file – such a debt showing that you paid off years ago.

The problem is that without looking at your credit record there’s no way to tell.

If you’ve been turned down for any kind of credit – least of all a payday loan – I would suggest you get hold of your credit records to check that they’re accurate. Ignore all the companies offering to provide your records for an excessive fee – there are other companies who will provide your credit records for free.

Even better – don’t just request them once – instead over the coming months and years regularly check your records. This helps you to not only ensure they are consistently accurate, but also you’ll be able to see those ratings going up over time. It’s a beautiful thing to see.

Negotiate With Existing Debt Providers

If you’re getting declined for payday loans then it’s quite likely that you have other forms of debt – credit cards, student loans, auto loans etc. Perhaps the payday loan company is worried that that your repayments are so high on your existing debt that you may struggle to meet repayments on another loan.

Contact your existing debt providers to discuss your situation. If you’re applying for more debt then you probably don’t have plenty of cash lying around to pay off this debt; instead you need to try and reduce your monthly payments. Doing so will free up a little more cash for you each month. It might not be a nice conversation to have, but you can probably manage to negotiate down your monthly fees to save money.

Stop Applying for New Debt

If your car won’t start then constantly turned the ignition can do more harm than good; you’ll flood the engine and reduce the chances of your engine starting with every additional try. Applying for credit is very similar. If a potential new lender sees that you’ve applied for lots of loans recently then they’re more likely to turn you down.

Of course, playing devil’s advocate for a moment, if your financial situation is serious then applying for more debt might offer a quick fix, but over the longer term it may do more harm than good.

So stop applying for new credit right now. Find other solutions, and if you really do still need then a new loan then re-apply some months later.

Slash Your Spending

People don’t apply for payday loans for fun. We do it because we’re desperate for cash and need a rapid solution.

When I was slowly digging my way out of a mound of debt the single most effective solution was simply slashing my spending.

I’ve written about the process in detail here.

To summarize, go through your recent bank statements and look to eliminate or downsize anything that isn’t 100% necessary. Your cell phone, your cable bill, nights out and more.

Many people are surprised just how much extra cash they have available when going through this process. Even better – you can start benefiting today.

Sell Belongings That Aren’t 100% Necessary

What possessions have you got sitting around your house that aren’t 100% necessary for survival? Do you have a video game console? A coffee table? A food processor? You might feel emotionally tied to these possessions, but selling them can quickly free up a whole load of cash.

To give you a specific example from my personal debt pay-off story, I listed some books on Amazon and sold dozens of them in a matter of weeks. I literally had money sitting on my shelf for years just waiting for me to grasp.

Use Your Local Pawn Shop

Selling your belongings can offer you the greatest return on investment, but it can of course take a few days before the cash starts coming in. Pawn shops are the opposite; they’ll often offer you far less cash than you might get elsewhere, but you’ll get cash in your hand within minutes.

So if you’re at the point that your rent is due and you don’t have a penny left in your bank account then taking whatever you can spare down to your local pawn shop can make all the difference.

Avoid High Interest Debt

By this point you should have repaired your credit and reduced your monthly expenses. Oddly, all this effort can have another knock-on effect – it can actually increase your odds of being accepted for more traditional sources of credit – with much lower interest rates.

Therefore once your finances are back in order, next time you decide that you want to take out a loan consider starting with high street or online lenders rather than going straight for a payday loan. If you’re approved then you’ll save yourself a boatload of money, especially if you’re borrowing over a longer period of time.