What is a payday loan?
A financial payday loan consists of a contract between the bank and the customer in which the institution grants a certain amount of money to the consumer to purchase goods or services.
In this way, the client undertakes to pay the payday loan back within a certain time and at interest rates defined by the bank.
However, in granting a consolidated payday loan, the bank is running a risk that translates into the likelihood of not recovering the money it lent. Thus, the higher the risk of the operation, the higher the interest rates applied, which will make the final cost of the consolidated loan higher.
At the limit, if the financial institution’s experts consider that the risk of the transaction is too high, your loan application may be refused.
If you have been refused loan, we advise you to investigate and understand why the financial institution has made such a decision.
Once you’ve uncovered the reason (or reasons) for your declined loan application, it’s time to get down to work and improve your reputation with the bank to get approved for funding.
What to do after a declined loan application?
1. Review your bank records and confirm if there are any errors
Banks investigate your financial history to see if you are usually compliant with your payments. A declined loan request can be derived from past defaults that are recorded in your bank history. To check your records you can access the loan Responsibility Center (CRC).
This information system is available online, to any citizen, on the website of the Bank of Portugal and allows you to have access to your banking history. It contains positive information (regular) and negative (default, if any) in relation to its loan operations.
This information may also be requested in person at the Banco de Portugal service counters.
It is not your responsibility to make changes if you find an error, but you should immediately contact the loan institution because it is the one that has the power to rectify or change your registration.
2. Look for solutions to avoid over-indebtedness
If you are in a situation where you feel that you are putting pressure on your effort rate and are having difficulty paying your benefits at the end of the month, or if you are already in arrears , it is best to seek help. We advise, first of all, to speak with your bank and explain the situation.
The bank can offer you several ways to avoid debt, in particular through the PERSI (Extrajudicial Procedure for Regularization of Situations of Default). This process is based on an agreement between the bank and the client where proposals for regularizing loan are submitted.
One of the hypotheses normally presented is the renegotiation of loan where the possibility of reducing the benefit is offered by extending the term of payment. However, interest rates will be higher, so the final cost of loan will increase. Another solution, if I have more than one payday loan at a time, goes through the consolidation of loans .
This strategy allows you to put all your debts together in a single installment, substantially reducing the monthly amount to be paid, and can also contribute to the reduction of interest rates.
Put the loans together into one
If you begin to feel that your effort rate is being over-pressured, you may consider requesting a transfer of your loan to another institution. This solution is suitable, as a rule, to mortgage payday loans in order to look for lower spread offers to facilitate the payment of installments.
In extreme cases of over-indebtedness you have the possibility of requesting personal insolvency . This is the last step if you can not settle your debts.
There are also support entities for indebted families and individuals such as APOIARE, the Over-Indebtedness Support Office (GAS) and the Bank of Portugal’s Indebted Customer Support Network (RACE).
3. Do not make other loan requests
If your loan application was rejected by the first financial institution you resorted to, it is most likely that the financial experts who analyzed your application identified that it represented risks to the bank. It will not be worthwhile to continue trying other institutions until you see the causes of the first loan rejection resolved.
4. Look for ways to improve your reputation with the bank.
“Past is past” and you can always try to improve your less positive track record with the bank. For example, if you have improved your professional conditions and have been awarded an effective contract for others, giving you more financial stability, you can (and should) present the bank with a guarantee, as it is a way of proving that your effort rate will be reduced . Other collateral, such as your home mortgage or a guarantor’s submission, also represent capital gains to avoid a declined loan application.
5. Confirm your bank report again
After following the steps above that you find relevant to your loan refusal status, re-confirm your bank report within a potential period of up to three months to make sure that all information has been rectified and changed. If everything is in order, you can proceed to the new loan application.