People often suggest that, as payday loans are advanced without credit checks, the lender is acting irresponsibly loaning out money carte blanche without doing background checks first. Whilst it’s true that most payday lenders are not so concerned with credit history, to say that they don’t carry out checks is something of a myth.
Twice in the last twelve months the FSA has investigated thoroughly the payday loan market. Whilst a few notable cases have been brought into the eye of the media, the majority of companies in the marketplace passed the tests with an absolute clean bill of health.
Online lenders are not banks, buildings or credit cards – if they were, what would be the point of their existence? Absolutely none. The fact that the FSA has given the payday loan industry a clean bill of health – with the exception of ensuring that the full details of the amount repayable are visibly displayed in a close approximation to the other loan details – not only gives us the confidence that payday loans provide an essential service but that they’re also doing a good job at it.
They are here to serve a market for people who need quick cash advances and – why there is no credit check for payday loans is – it is accepted that the traditional routes have been exhausted before people apply.
For example. if you are short of cash for that unforeseen requirement, before considering a payday loan you would simply either make a call to your credit card provider to raise your limit or bank to get an overdraft extension or bridging loan to tide you over, wouldn’t you?
However, since money has become even more expensive for banks to borrow and lending guidelines have become a lot more stringent, the old days of a new credit card application form landing on the doormat every other day are long gone.
If you have an exceptional credit history, you’ll be obliged. If, however, you’re turned down then payday loans act as a back-up for that hour of need.
So, why is there no credit check with payday loans? Because it is simply accepted that the customer would have gone down the preferred vendor route beforehand and been refused or the lender could not get the money to the needy party in time.
But there are conditions which every borrower has to meet and to which they have to adhere once the loan has been transacted, all of which should be read and understood before proceeding with the loan.
The usual conditions, even if you have poor credit, are as follows:-
- Are you in full time employment?
- There may be a minimum amount of earnings required, and
- Some payday loan firms insist on a minimum term of service at your current employer
- Are you aged 18 years or above?
- Are you a registered passport holder within the same country?
- Do you have a live, working bank account into which the money can be deposited into and collected from?
Other payday lenders may ask you to name a guarantor if you have bad credit and are, when the day comes to collect the money, unable to repay the full amount. This is worth noting if you believe you are going to fall short on your nominated day for repaying the loan.
If you have used a guarantor, be sure to tell them so that they have appropriate funds available. If they cannot or you have not had to name a guarantor but know full well that the funds aren’t going to be there at your prearranged collection date, get in touch with the payday loan firm.
Due to the intensive media coverage received about individuals getting into ‘spiralling’ debt as they’ve been unable to pay and the FSA spotlight on the industry, many online payday loan companies have moved up a gear in their customer service. It is in their interest and yours to get the matter resolved before any possible situation gets out of hand – the swifter you contact them if you foresee a problem, the more able they will be to help you out.
So, yes, it’s true – payday loan firms have their own set of criteria to assess their potential customers. If you were wondering Why are there no credit checks with payday loans, it’s not because they’re lending irresponsibly, but because they are dealing with an assumed set of circumstances which the FSA, for the majority of companies within the industry, has assessed to carry a clean bill of health and meeting the approved guidelines laid out by them for online lending.