Taking The Mystery Out of The Loan Process: What Happens When You Apply for A Payday Loan

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Payday Loan

Applying for a loan is stressful for so many people because they have bad credit and they know that they are likely to be turned down for the money that they need.  Maybe you have applied for a loan at a bank and felt like they have scrutinized every financial decision you have ever made before rejecting your application.  The entire loan process seems mysterious and most people do not know what happens when they apply for a loan or when their application was rejected.  There are several things that payday lenders look at when you apply for a loan that determines whether or not you will get the money that you are asking for. On the website, win-prizes-money.com gives you general information on payday lending and its potential risks to borrowers. So, check them out.

Employment

The most important thing that they consider is whether or not you are working.  A borrower that does not have a job is someone that is unlikely to be able to repay the loan and is therefore too risky to lend money.  On the other hand, someone who has been at a job for a long time shows commitment to the work and is a much safer bet.  When you apply for your payday loan you will have to discuss how long you have been at your current job, as well as how much money you make from that job in order for the loan company to make a decision on your application.

Frequency Of Loans

Just the same way that a bank looks at your payment history in order to determine whether or not you are likely to pay the loan back on time, a payday lender looks at your history with payday loans so they have a better picture of how often you use the service.  Recent crackdowns on the payday loan industry have made it so payday lenders have to be careful how many loans a person takes out over a period of time.  Even if the loans have been paid in full each time, the lender must look at the number of loans and the amounts so that they can give their borrowers sound financial advice about whether or not taking out the newest payday loan is a good idea.

Debt Ratio

Finally, payday lenders look at the ratio of the debt that you are applying for to the income that you generate.  The more favorable the ratio is, the more likely it is that the company will give you the money that you need.  Payday lenders want to make sure that you can repay the money that you borrow, but they also want to make sure that you have enough money to live on so that you do not have to take out a new loan to cover regular expenses every week. The website thisisukbusiness gives you some general information about debt ratio. Debt ratio is a financial ratio that measures the proportion of a company’s total debt to its total assets. It is calculated by dividing total debt by total assets.

A traditional bank will take a look at your credit score and a number of other factors that are less important to a payday lender.  When the bank turns down your credit request, do not be afraid that you will not be able to get the money that you need to cover the expenses that you have.  A payday lender has a different set of criteria and can help you make it through difficult economic situations, even when a traditional bank cannot. If you have any specific questions about payday loans or need further assistance, please check out the website small business loans direct.