Finances

Guide to Applying For a Payday Loan in 2020

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Written by Quentin Hack

Life circumstances bring different situations that may require you to seek the assistance of a loan. There are different types of loans, so before you apply for a one, you should first identify the type of loan you want. For a secured loan, one can guarantee the loan to collateral such as a car or house. However, for an unsecured one, it is not attached to any collateral in case of default. There are several things that you need to tick off your checklist before securing a loan.

1. Identify how much you need

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The first step to securing a payday loan is identifying how much you need. This should be based on how much debt you can handle and how much you can pay back in a given period. The higher the amount, the more the interest you will payback. Therefore decide on the amount you need to accomplish your financial needs and stick to it. It is wise to take a loan that will not put you in financial constraints. Ensure your monthly installment does not exceed your disposable income.

2. Identify a credible lender

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It is important to identify a legit lender such as LoanPig.co.uk. Many institutions or individuals can offer you a loan, but it is your responsibility to identify a reliable person or institution that can handle your loan with the utmost professionalism. Lenders lend people money, expecting to be paid in the form of interest. Therefore your ability to pay is of utmost importance to a lender. There are short term and long term loans. Short term ones are mainly to support a temporary situation or boost business capital, which is repayable within a year, while long term loans are made available to support long term investments and are mainly for a period of between 3-10years. I recommend you research a financial institution to avoid cases of fraud.

3. Check your credit score

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A credit score is a number that ranges between 300 and 850 and is used to determine a customer’s creditworthiness. It is mainly based on credit history, where they check on the number of open accounts, repayment history, and the levels of debt. Most financial institutions use Experian, Equifax and TranUnion to assess a customer’s credit score. A high credit score means you are a good potential client to a lender, while a low credit score means that you are a potential defaulter. An excellent credit score will be 800 and above, while a low credit score will be 579 and below. Lenders will evaluate your ability to pay the loan promptly by using a credit score. A good credit score will qualify you for the best interest rates and approval for the loan you have applied for. Therefore it is important to ensure your credit score has a good rating for you to acquire loans easily and have bargaining power on getting ones at a lower rate.

4. Identify lender requirements

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Some requirements should be met by the customer when applying for a payday loan. Therefore check if you’re eligible before applying. Although they vary from one institution to another, these are the basic ones:

  • Credit history-this This is mainly for at least three years.
  • Annual income-it should be above £25000 per year.
  • Credit score-the rating should be 640 and above.
  • Debt to income ratio-most preferred debt to income ratio is 43% and below.
  • Regular source of income
  • Active savings bank account

5. Comparison with other lenders

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It is important to compare what other lenders are offering in terms of processing fees, interest rates, loan terms, and payment options. Choose an institution offering the lowest interest rates for a given period. It will provide you with the best offer in terms of paying back the loan. It should also allow for different modes of payment, such as standing order, postdated cheque, and electronic clearance system via salary to suit a customer’s convenience.

Have a background check of the institution to confirm that it is registered and that it has the authorization to be operating. Intoday’sworld, fraud is a recurrent feature in financial institutions. Therefore it is important to research well on how long it has existed and has been lending money to clients. Check the reviews from individuals who have used it before to allow you to make an informed decision. If the reviews are good, go ahead and gather your documents and information.

6. Gather documents and information

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For your loan to be approved, there are certain documents that you should provide for your loan to be processed. The lender will give you a list of documents that you should provide. They include:

  • National identity card to check if you are a registered citizen.
  • Bank statements to show bank balance and how active the account is.
  • Contract letter to show proof of employment.
  • Social security number to check your credit score.
  • Employers contact information.

7. Filling of application forms

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The lender provides you with online application forms that you fill to start processing the loan. Filling the forms accurately and truthfully is of utmost importance to a lender. The forms will allow the lender to see your potential rate and ultimately approve the loan.

Online communication for approval of the loan and finally, the disbursement will be made to your email and a loan agreement signed. The agreement will provide the lenders and customers information and also specify the loan amount, terms of the loan, the date of the loan, and the repayment schedule.

Conclusion

Applying for a payday loan from a financial institution poses challenges to someone applying for the first time. Evaluate the requirements that the lender will expect from you and try to meet them. Counter check everything to make sure all the documents are available and up to date. With the seven guides discussed above, you can be sure the process of acquiring a loan will be simple for you.

About the author

Quentin Hack

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