How Much Can I Borrow From a Payday Loan Online?
When you apply for a payday loan, you probably look at how much you can borrow, ranging from £50 to £2,500. If you need funds for an emergency purpose, you may try to apply as much as you possibly can. But when you fill in your details, the lenders will carry out a number of checks that will determine how much you can borrow, as explained below:
What is your affordability?
Lenders have a responsibility to consider your affordability when deciding how much you can borrow. As part of the responsible lending criteria, loan providers need to assess your incomings and expenses to get a good idea of what you can afford to borrow and repay.
If the lender allowed you to borrow too much, it could put a strain on your finances and cause you to fall into arrears – so lenders have to carry out adequate affordability measures to avoid this. Such checks include asking you to fill in information about your rent, credit card bills and monthly expenses in the application form as well as requesting a copy of your pay-slip and bank statement to gain further insight.
What is your credit like?
Your credit score will also determine how much you can borrow. Lenders will run standard credit checks during your application using credit reference agencies such as Experian and Equifax. The results will tell a lender how well you have paid other forms of credit in the past and how much credit you have outstanding, allowing them to assess risk and how much you should be able to borrow.
If you have good credit, suggesting you have a history of good repayment, you should be able to borrow more. In addition, some lenders may offer a better interest rate for those with good credit compared to those with bad credit because they are deemed as a lower risk of default. You can check your credit score here.
Homeowners will usually be strong candidates to borrow extended funds because they have had to prove good credit in order to get a mortgage accepted and lenders will take this into consideration.
Are you a repeat customer?
If you have borrowed from the same payday lender before and you repaid on time, you may be able to borrow more than originally, provided you pass the other affordability checks.
First time borrowers for payday loans can typically borrow up to £400 or £500 on their first loan but this can increase up to £2,000 for repeat customers. By paying loans consecutively on time, your ‘trust rating’ increases with the lender and they feel more comfortable lending your higher amounts. There is also the fact that when you repay your loan on time, the information is fed back to the credit reference bureaus and this will cause your credit score to improve, making your eligible to borrow extended amounts.
Type of loan
The type of loan will also impact the amount that you wish to borrow. Loans that are secured to your car or house may allow you to borrow more because the lender can repossess your property if your loan is unpaid.
Payday loans falls under unsecured, meaning that you do not need to put down anything as collateral and you may not be able to borrow as much as you would for a mortgage for instance.
Typically, if your payday loan lasts only a few weeks, you cannot borrow thousands and thousands of pounds because it would be a huge financial burden to repay such a large amount in one lump sum on your next payday.
However, you can borrow up to £2,500 if you apply for an instalment loan. This can last anywhere from 2 months to 2 years and collections are made into smaller monthly repayments. This added flexibility means that borrowers have time to manage their finances and allow for repayments over time, hence they can borrow significantly more.
A lender’s criteria will vary
Each payday lender has a different definition of risk and how much they are willing to lend. Lenders will offer different amounts based on your criteria – to make an application today, you can apply for payday loans here.