How to Identify “Bad Borrowers” Before You’re At Risk

Quickcheck Canada
July 15, 2016

Those who are in the payday loan business know just how important it is to collect repayment on loaned funds. Lenders who offer loans to individuals need to be sure they are only loaning money on a strict basis. There are some simple ways a lending company can find out if the person applying for a loan can be considered a "bad borrower" and may put their business at risk.

Checking a Borrower's Employment History

Those who aren't able to hold a steady job for more than 2 years are considered higher risk. If someone has been at the same job for some time and just happened to experience an emergency situation where they are in need of extra cash, they are more than likely going to pay their loan back, and do it on time.

An Applicant's Income Level

Another thing that can determine whether or not someone is a "bad borrower" is their income level. People with low annual salaries are not likely going to pay back a loan within the allotted time frame. However, some of these people may be reliable, but their maximum loan amount should be smaller than someone who has a higher salary.

How Close a Borrower Lives to the Store

Some lenders don't even consider this, but those who live closer to the payday loan store have more incentive to pay back their loan. If someone lives far away from the place they borrowed money from, they may feel travelling the distance makes it too inconvenient to return the money on time, if at all. A smart lender is only going to provide loans to those within a certain proximity to their location.

The Reason for Borrowing the Money

One of the most important ways to identify a "bad borrower" is by determining what they are going to use the money for. Someone who just wants some extra pocket money should not be considered for a loan because they are likely going to be cavalier about repaying the funds.

These are just some of the main ways to identify someone who is a potential risk when borrowing money. There are also plenty of other ways that a bad borrower can be identified, such as checking their credit score, their loan history, and investigating their current assets. If someone has a car in their name and is willing to offer the title as collateral, then there's a very good chance they are going to pay their loan back. A smart lender is going to take every aspect of a borrower's life into consideration before they provide them with a loan, especially a large one.

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