Individuals fail to get a payday loan due to poor credit history, insufficient income, multiple outstanding payday loans, lack of documentation, age requirement, and state regulations. The following factors make it difficult for borrowers to qualify for a payday loan and lead to the lender denying their application.

Lenders have standards that loan applicants must achieve before they are approved. Possessing a high credit score, consistent income, a low debt-to-income ratio, and a record of timely payments are all factors that help. Documentation, including evidence of income, job history, and bank records, are requirements by certain lenders.

Certain loan types have other criteria that lenders must meet, like a minimum credit score or a certain kind of collateral. Borrowers must investigate the financial institution’s criteria before applying for a loan. Improving the chances of loan approval and meeting the lender’s requirements result in a cheaper interest rate and more favorable repayment conditions.

Understanding Payday Loans

A payday loan is a type of short-term borrowing used by individuals who need quick cash before their next paycheck arrives. It involves getting a small amount of money and repaying it on or shortly after the borrower’s next scheduled pay date, with interest added. The interest rates of loans are quite high – much higher than other forms of credit.

Payday Loans Costs and APR

Pew researchers calculated payday loan costs and APRs using scenarios in the table. The researchers computed monthly payments based on the four-month payday installment loan duration. Single-payment payday loans have 14 days; thus, the PEW researcher calculated the APR based on the cost to borrow for four months, which is eight pay cycles or 112 days. Installment loans have four pay cycles and 120 days.

Loan LimitAverage Maximum Loan SizeLoan TermNumber of Pay CyclesDaysAPR Calculation
Less than $500$40014 days8112Single-payment payday loan APR
Less than $500$4004 months4120Payday installment loan monthly payments

Reason For Not Qualifying To Get A Payday Loan

Individuals did not qualify for a payday loan due to poor credit scores, lack of steady income, outstanding payday loans, failure to meet eligibility criteria, or living in a state where payday lending is illegal or heavily regulated.

Poor Credit Score 

A poor credit score makes obtaining loans or credit cards difficult, resulting in higher interest rates and borrowing fees. A credit score is a numerical representation of an individual’s creditworthiness based on their credit history, and lenders use it to determine the likelihood of a borrower repaying their debts.

Missed or late payments, defaults, bankruptcy, or high debt levels cause a low credit score. Individuals must pay their bills on time, keep their credit utilization low, and review their credit reports for errors. Work with a credit counselor or a credit repair company to develop a plan to improve credit.

No Steady Source Of Income

A steady income has various sources, like a full-time or part-time job, self-employment, or government benefits. Having no steady source of income make it difficult to obtain loans or credit, as lenders require proof of income to know the borrower to repay the debt.

Lenders without a steady income view the borrower as high risk and hesitate to lend to them. Borrowers are able to obtain loans or credit cards with alternative forms of income, like disability benefits or child support payments. 

Outstanding Payday Loans

Having outstanding payday loans impact the ability to obtain additional loans. Many states have laws that regulate or limit the number of payday loans a borrower has at once or within a certain time frame. Lenders see a potential customer with outstanding payday loans as too high of a risk and reject their application.

Multiple payday loans make it difficult to repay the debt, as the interest rates and fees add up quickly, leading to a cycle of debt. Don’t take multiple payday loans; explore other options, like personal or credit cards, to meet financial needs.

Failure To Meet Eligibility Criteria

Each payday lender has their own eligibility criteria, like age, income, and residency requirements, and if an individual does not meet the criteria, they are approved for a loan. Lenders require borrowers to have a certain credit score or a minimum income level.

Payday Lending Is Illegal In Their State

Payday lending is regulated state-by-state; in other states, it is either illegal or heavily regulated. A person is unable to get a payday loan if they reside in a state where loans are prohibited by law. Other states have implemented laws to protect consumers from high-interest rates and predatory lending practices, while others have completely banned payday lending. 

How To Get A Payday Loan?

Applicants must research and compare lenders, gather necessary information, apply for a loan online or in person, provide the required information, review and sign the loan agreement, receive funds, and repay the loan according to the agreement to get a payday loan. Below are the following steps to get a payday loan.

  1. Research and compare different lenders to find one that offers payday loans that fit applicants’ needs.
  2. Gather the identification, income verification, and bank account information.
  3. Apply for a loan online or in person at a physical location. Visit the lender’s website and fill out the application form.
  4. Provide the required information, including personal, income, and bank account information.
  5. Review and sign the loan agreement, which outlines the loan terms, including the loan amount, fees, and repayment terms.
  6. Receive funds. The lender transfers the loan funds to the bank account. Other lenders offer cash disbursement.
  7. Repay the loan according to the loan agreement, which involves paying the loan amount, fees, and interest on the due date or through a repayment plan.

Requirements to Get A Payday Loan

Borrowers must provide accurate and complete information when getting a payday loan. Personal information includes name, address, phone number, and social security number. Other lenders ask for other information. The process is straightforward if the applicant provides accurate information and reviews the loan terms carefully. 

  • Be at least 18 years old or older
  • Have a valid government-issued ID, like a driver’s license
  • Must provide proof of address
  • Have a steady source of income, like a job or government benefits
  • Have an active checking account in their name
  • Provide a phone number and email address for contact and verification purposes.

Alternative Options To Get Quick Cash

The alternatives to get quick cash include credit unions, credit card cash advances, borrowing from relatives or friends, and personal loans. Credit unions provide members with banking services rather than making a profit for stockholders, which allows them to provide reduced interest rates on loans and credit cards to their members. Personal loans offer fixed interest rates and flexible repayment terms for personal expenses. Credit cards and borrowing from family or friends are useful alternatives to payday loans in emergencies. 

Credit Unions

Credit Unions offer lower interest rates on loans and credit cards because their primary goal is to provide financial services to their members rather than generate profits for shareholders. They are cooperative financial institutions that provide members with various services, including access to loans that borrowers repay in installments over a while.

Credit Card Cash Advance

A credit card cash advance is a short-term loan that borrowers obtain at an ATM or bank using their credit card. The amount that applicants borrow depends on the credit limit of the card and the available cash advance limit.

Credit card cash advances are easily accessible, as borrowers use their credit cards to obtain the necessary cash. Another advantage is that they are useful for various purposes, like covering unexpected expenses or emergencies.

Relatives or Friends

Borrowing money from relatives or friends is a good alternative, but borrowers must approach the situation with care and transparency to not cause damage the relationships. The advantage of borrowing from family or friends is offering more flexible repayment terms, as the lender works with the borrower to set up a repayment schedule that works for both parties. Another advantage is that borrowing from family or friends is a convenient and accessible option. They offer lower or no interest rates, saving the borrower money. 

Personal Loans

A personal loan is an unsecured loan useful for various personal expenses, like home renovation, weddings, medical bills, or debt consolidation. They don’t need collateral. Lenders won’t seize any assets if the borrower defaults.

Personal loans have a fixed interest rate and a fixed repayment term, which vary from a few months to several years. The interest rate and the repayment term depending on the borrower’s credit score, income, and other factors.

Bottom Line

Payday loans are short-term borrowing for individuals who need quick cash before their next paycheck. Borrowers fail to qualify for a payday loan due to poor credit scores, lack of steady income, outstanding payday loans, failure to meet eligibility criteria, or living in a state where payday lending is illegal or heavily regulated.

Borrowers must investigate the lender’s criteria before applying for a loan and possess a high credit score, consistent income, a low debt-to-income ratio, and timely payments to improve the chances of loan approval and meet lender requirements. Don’t get multiple payday loans; explore options like personal loans or credit cards to meet financial needs.

Jason Rathman

Jason Rathman


Jason writes about all financial topics such as loans, debt solutions, and bankruptcy. He is an expert when it comes to subjects like APR, loan fine print, debt collection laws within the United States. With his in-depth knowledge of all things financial, he is a great asset to Greendayonline.