Explaining payday loan eligibility criteria

If you’d like to know more about eligibility criteria for payday loans, but don’t know where to start, you’ve come to the right place. Ever wondered what the basic criteria are that most payday loan lenders will ask for? Or whether you can apply for a payday loan with a poor credit rating, or without a bank account? Read on as we dive into the ins and outs of payday loan eligibility checks and how they work.

In this guide: 

• What is a payday loan?
• What is a payday loan eligibility checker?
• What are the minimum payday loan lending criteria? 
• What else is required for a payday loan eligibility check? 
• What are the alternatives for people who don’t meet the criteria?
• Payday loan eligibility FAQs
• The bottom line…

What is a payday loan?

A payday loan is a type of short-term borrowing option designed to help you cover unexpected expenses. They’re often to be repaid quickly, usually within weeks or months, coinciding with the borrowers next payday.

Payday loans offer a convenient way to access quick cash, allowing you to cover urgent car repairs or home maintenance. You then pay the money back by the agreed deadline.

Having said this, payday loans aren’t the right route for everyone. Responsible lenders carry out thorough eligibility checks to ensure each applicant is a good fit for the product. At Moneyboat, we offer short-term loans as an alternative to standard payday loans, offering borrowers the flexibility to repay in manageable instalments up to six months.

What is a payday loan eligibility checker?

A short-term loan or payday loan eligibility checker is a tool that allows you to determine the likelihood of getting approved for a loan without impacting your credit score. It uses a soft credit check to assess your creditworthiness, helping you see whether you’re likely to be accepted before making your application.

With payday loans, eligibility checks are crucial. Before applying, it’s important to check any lending criteria published on a lender’s website. If you apply for loans that you’re later turned down for, this can damage your credit score and make it even harder to secure credit in the future.

What are the minimum payday loan lending criteria?

Most payday lenders will consider applications from a wide range of prospective borrowers, including those who might not have the most perfect credit background. However, there are a few minimum payday loan requirements that almost all responsible lenders will want you to meet before they’ll even look at your application:

1. You are over 18 years old
2. You have a UK bank account
3. You are a UK citizen

Responsible lenders registered and authorised by the Financial Conduct Authority (FCA) should go a little further in applying minimum lending criteria. If you meet the three basic payday loan criteria, you can usually apply for a payday loan. However, to have a realistic chance of being approved, you will often have to meet other eligibility criteria too.

What else is required for a payday loan eligibility check?

Responsible direct lenders may also look for the following minimum lending criteria for payday loans:

• Your credit history
• Your history of bankruptcy or CCJs
• Your income
• Your employment status

Your credit history

Payday lenders registered by the FCA will have to carry out a creditworthiness assessment before entering into a credit agreement with you. This can take several forms, depending on what the lender deems necessary and relevant. But it should be sufficient to make sure the lender is confident that you will be able to make the repayments as agreed.

The same applies for lenders assessing an application for an increase in the loan amount or a further loan on top of, or following, an existing loan.

If you have had problems repaying loans in the past, you may still be accepted for a payday loan, providing you meet the other minimum requirements. However, your credit rating may impact the amount you may be offered, and the interest rates you will pay. Borrowers often get a better deal if they have a better credit record.

CCJs and bankruptcy

Certain credit issues will be viewed more negatively than others. These include County Court Judgments (CCJs), which have yet to be settled, and bankruptcy. If you have either of these on your record, you may struggle to secure a payday loan with a responsible lender. Considering a lender that isn’t registered with the FCA is not recommended, and could lead to more serious financial risks.

Your income

Having a regular income is one of the main things that payday and direct lenders will look for when deciding whether they should approve your application. After all, if you don’t have a regular income, you won’t be able to predictably repay a loan.

Some direct lenders will insist that you have a minimum income, such as £1,000 per month, for example. This helps them avoid lending to people who are unlikely to be able to repay a loan without leaving themselves financially vulnerable.

Employment

Most FCA-registered short-term or payday lenders will check that you’re employed before agreeing to lend you money. Although an employment contract can end, leaving a borrower in a difficult financial position, being employed at the point at which your credit agreement is signed, is usually a minimum lending criterion.

Some responsible lenders might accept self-employed applicants, especially if they can demonstrate a solid regular income. However, most lenders still view self-employment as a less predictable source of income.

What are the alternatives for people who don’t meet the payday loan lending criteria?

If you’re looking for a personal loan but are currently either unemployed, don’t have enough regular income, or have a poor credit history, there are alternatives to consider.

Guarantor loans

These are personal loans that are taken out by a borrower, but guaranteed by someone who agrees to cover the debt if the borrower is not able to. Lenders check both the borrower’s and the guarantor’s credit history and financial details before agreeing to a guarantor loan. Both parties may then incur damage to their credit file if the debt is not repaid on time.

Overdrafts

You may find that your bank account provider may consider opening an overdraft facility on your account if you need a small amount of cash to tide you over. Overdrafts do charge interest, but you can often minimise these costs by paying them off in full each month.

Borrowing from friends or family

This may seem like an option that you might rather avoid. But many people are surprised at how willing loved ones are to help you out over a short period. Everyone struggles from time to time and there’s no shame in asking for help.

Agreeing to a payment plan

If you’re looking to borrow money to repay another debt, perhaps the best solution is to approach the lender or creditor you owe money to and ask them for a new payment plan. Being honest is always the right policy when it comes to debt. Most responsible lenders will help you repay in a way that you can afford, over a longer period, or with a payment break, for example.

Signing up to a credit union

Credit unions still have a place in helping people access credit when they need it, regardless of their situation. The idea is that you become part of a community that pays into the credit union, which then lends out to members when they need it.

Always remember to consider the above alternatives before applying for a payday loan. If you can get by without applying for emergency loans or other short-term loans, then you should try to avoid getting into debt.

And if you do decide to go ahead and apply for a short-term or payday loan, only consider responsible lenders who are registered with the FCA.

Payday loan eligibility FAQs

How quickly can I access the money?

The nature of short-term loans is that they are available quickly – often on the day you apply – but they also need to be repaid quickly. As a result, payday loans might be most appropriate for people who only need a small amount of money and may not want to take on a longer-term financial commitment.

Provided you meet the lending criteria and pass any credit and affordability checks, you could have the money in your bank account in as little as an hour with certain lenders.

Will I be accepted if I have bad credit?

Most online direct lenders will have minimum requirements, which usually include being over 18 years of age, holding a UK bank account and residing in the UK. However, responsible lenders will also need to see proof of your income, employment status and credit history. Carrying out credit checks and ensuring borrowers have the means to repay is an important aspect of responsible lending.

If you have a history of problems with debt and your credit score has suffered as a result, this doesn’t necessarily mean that you won’t be able to secure a payday loan. However, you may not be offered the best rates and may have limits on the borrowing amount and the repayment term.

Remember, you can use a payday loans eligibility checker to get a better idea of whether you’ll be accepted.

Where can I find the terms and conditions?

Before you think about applying for an online payday loan, you’ll need to read the lender’s terms and conditions thoroughly. Most will publish clear terms on their websites, as they are required to do under the FCA regulations.

It’s important to check whether fees or charges apply and whether you are happy with them. Some lenders will charge fees to borrowers on top of the interest payable on the loan. Fees may be payable for late or non-payment, early repayment or setting up the loan in the first place, for example.

What happens if you miss a payment?

Terms and conditions should set out clearly what happens if a borrower fails to make a scheduled repayment. Late or non-payment fees usually apply, and you may also have to pay more interest on the loan if it takes you longer to repay.

Most responsible lenders will encourage you to speak to them if you are having trouble meeting your repayment responsibilities to try to work out a solution that is acceptable to both parties. However, bear in mind that this will usually involve larger interest rate payments over the life of the loan.

The bottom line…

Hopefully, you now feel equipped with the necessary knowledge about payday loan criteria and payday loan eligibility. Once you have identified the right loan for you, applying online is very simple, with usually just a few key pieces of information required. If you do your research, consider your affordability and are eligible, there’s usually no reason why you can’t apply for the money you need to help tide you over.

For more insights, why not head over to the Moneyboat blog? Learn more about your personal cash flow with our disposable income guide, or find out more about the ins and outs of credit agreements with our interest rate guide.

Need to speak with someone about your finances? For independent support, contact Citizens Advice, StepChange and MoneyHelper for third party guidance.