How do payday lenders assess your application?

Elizabeth Barry 19 November 2015

What happens when you click that big green button? We show you what gets your application across the line and what stops it in its tracks.

Each payday lender has its own lending criteria and way of assessing applications. The most important criterion is determining whether you can afford to pay back the loan. To do this, they ask for a range of information and use it to assess your financial circumstances.

Will you be approved for that loan? This guide will take you through how a lender comes to their decision.

What documents and information do I give to a payday lender?

  • Documents to verify your identity, such as your driver's licence or passport
  • Your Internet banking details, which lenders use to access a read-only copy of the last 90 days' of your banking history
  • Your employment details, including whether you are employed, how long you have worked there and the nature of that employment (full-time, part-time, etc.)
  • Your income and expenses
  • If you receive Centrelink payments, you will need to provide details of this and may need to provide Centrelink receipts
  • You will need to indicate whether you have taken out a short-term loan in the last 90 days and whether this loan will be used to pay off another payday loan

How do lenders use these documents to approve me?

While you will be asked for different information depending on which payday lender you apply with, the information is generally used for similar purposes. Here's how lenders use the following details:

  • Your bank statements for the last three months

Lenders will go through the last 90 days' of your banking history to get a general idea of your financial position. Can you afford the loan you are taking out? Are you receiving the income you say you are? Lenders need to be confident that you will be able to manage the repayments, and that you will have money in your account on the day they plan to direct debit repayments. If your account does not show the income you say you are earning, for example, because you earn your income in cash, then you will not be approved for the loan.

  • Information to conduct a credit check

Your personal information helps lenders conduct a credit check. Unless they indicate otherwise (if they are no credit check lenders), all payday lenders will conduct a credit check but generally still accept bad credit borrowers. However, the level of bad credit they accept differs. For instance, some lenders will accept you if you are a current or discharged bankrupt while others will not.

Find out about your no credit check loan options

  • Your Centrelink payment information

Lenders are restricted as to how much they can lend to you if you receive Centrelink payments, and they may have rules to follow that they have set themselves. According to ASIC rules, if the majority of your income comes from Centrelink (50% or more) the repayments of the loan you're applying for can't exceed 20% of your income. This includes any other loan you are currently repaying.

  • Your income, pay dates and expenses

Your income and expenses will be used to determine how much of a loan you can afford, and your pay dates will be used by the lender to set your repayment schedule. This will all be verified using your bank statements.

How can I increase my chances of approval?

There isn't a surefire way to be approved for a payday loan. Before you submit your application, make sure you review all the eligibility criteria and ensure you meet them. If you are unsure about any of them get in touch with the lender. If you are not approved for the loan, avoid applying for another loan straight away. All applications for credit are listed on your credit file and applying for too many in a short space of time can damage your credit score.

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