How to Qualify for Payday Loans
Whether you plan to consolidate higher interest credit card debt, pay for unexpected car repairs or home repairs, or even fund a trip, finding the low interest loans may save you big bucks. Wondering how to qualify for the lowest rates out there? Here are a few tips to review before applying for that loan.
High Credit Equals Low Interest Loans
To qualify for the payday loans, it pays to have a great credit score and a solid credit file. Lenders will conduct a credit check and take a look at your credit score as part of the application process.
If you haven't already ordered your free annual credit report from AnnualCreditReport.com, do so before applying for a payday loan. Review the details of your credit report carefully, paying special attention to the sections on payment history, debt usage, credit age, and inquiries. Showing you have a good history of making payments in full and on time, reasonable debt usage and have few inquiries (many credit inquiries could suggest you're a habitual credit seeker – not a good thing) may help you qualify for a lower interest rate on a payday loan.
Have a Low Debt-Service Ratio
To improve the chances of qualifying for the best low interest rate payday loans, work on increasing your income and lowering your other debt. This improves what's known as your debt-service ratio or debt-to-income ratio, which indicates how much of your income it takes to make your debt payments. A lower ratio suggests you'd be a lower risk borrower, and more likely to pay back the loan, so the lender may be more likely to offer you the lowest lending rate.
Present a Solid Employment History
In addition to showing you have a good payment history and are responsible for paying back money you borrow, presenting a solid history of employment may also improve your chances of qualifying for payday loans because it shows commitment and responsibility. Your lender will likely ask for your employer's name and address, and how long you've been there. If you're self-employed, be prepared to verify your income via your personal tax returns.
Shorten Your Payday Loan Term
Another way to get the lowest rate possible on a fixed rate payday loan is to choose a shorter term, say one or two years instead of three or four years. The term is the time it takes you to pay off the loan, and short term rates are often lower than longer terms, though they do also come with higher monthly payments.
Good Credit is Not Key for Payday Loan
Before you apply for getting a loan, check your credit score, as it will determine whether you qualify for a loan and, if you do, what interest rate and terms you will receive. If you have bad credit, you still can get a payday loan, but you likely will receive a higher interest rate and will qualify for a smaller amount.
Applicants with average to excellent credit, that interprets into scores starting from 630 to 800, can be qualified for a payday loan at several lending institutions, including national banks. Those with less-than-stellar credit, or scores below 629, may have to approach a lot of forgiving institutions, such as credit unions and online lenders who have a lot of flexible lending standards.