Whatever kind of loan you are applying for, there are reasons for your loan to be rejected. Getting rejected with your loan application can make you feel discouraged.
You must know the reasons why you can get rejected. By having a great understanding of the lenders, your chances for rejection is unlikely.
To get you more idea on why your loan application could get rejected, here are some of the most common reasons.
Bad Credit Score
The loan applications’ most common reason for being rejected is a bad credit score. Banks and lenders can detect if you have late or overdue payments.
They will evaluate you based on your previous performances. So, if you have bad records and credit score, the lender would not take the risk and lend you a loan.
If you think you won’t meet the requirements, there are some other ways you can get a loan. However, you should know that they might increase their interest rates.
No Credit History
Some people avoid having credits because they are afraid of financial commitments. Little did they know that having a credit history will help them get approved with their future loan.
By having a credit history, banks and lenders will have something to base their assessment or evaluation. Your past payment records will give them an idea of how responsible you are as a borrower.
So if you are planning for a loan in the future, getting a credit history is the best first step that you can take. Be a responsible borrower so that you can build a good credit score.
Banks and lenders will check your capabilities to pay off debts before they approve your application. They usually check if you have a stable source of income.
There is no certain earning threshold for borrowing. But lenders like Bedok money lender would want to be assured that you will be able to afford the repayments.
If you do not have permanent employment, your application will likely be rejected. The same goes when you receive a not so good salary.
On the other hand, there are ways you can still apply for a loan. First, you can ask experts for advice and ask for adjustments regarding your repayment system.
You can also ask for a joint borrower or a guarantor to help you get a loan. But getting a guarantor isn’t as easy as it seems because you will need to get their trust first. Once you gain that trust from them, applying for a loan will be much easier.
If you are still paying for existing debt, your loan approval is unlikely to happen. This will give lenders such as the lucky plaza money lender a notion that you will not meet your obligations as a responsible borrower.
So before applying for a loan, it is better that you have paid off all other existing debts you have.
But if you are applying for a loan to pay off your debt, you can apply for a consolidation loan. It will help bring all obligations into a more affordable monthly payment plan.
Missing Details or Documents
One reason for your application to be rejected is when you have put wrong or missing information.
Always check your application thoroughly before passing it to the lender. Take note of data like your social security number, name, and address. Mind that loan rejection could reflect on your future applications.
Remember always to ensure that all data in your application form is correct.
Another reason for rejection is when you have passed incomplete documents. Make sure that you have all the necessary documents. One of the primary documents that they look for is income documents. You should provide them your payslips and appointment letters.
No Stable Job
Having a dangerous job can get your loan to be rejected. Having a stable job or income source will give lenders assurance that you can pay for your loan.
Most banks and moneylenders have specific requirements when it comes to employment. They require at least one or two years of work experience.
So if you tend to change jobs frequently, your chance for approval is not probable. This also applies to freelancers or self-employed individuals.
However, if you can provide them with all the necessary documents, you can still get approved. Some of the documents they may ask from you are your income tax documents, bank statements, and other income proofs.
Applied in a Wrong Bank
Different banks have different standards when it comes to approval. Before applying for a loan in a particular bank, make sure that the bank you apply to will give you the loan you need.
You should choose at least three banks when applying for a loan. So you will be given options that would give you the best offer. It could also give you a back up when one bank rejects you.
Take into consideration that too many rejections could negatively affect your record. It affects your credit score and further affects your future loan applications.
Before applying for a loan, you should know some other types of loans. Some types of loans are personal loans, car loans, or property loans. If you have a deep understanding of the kinds of loans, you will find it easier to find the loan to suit your needs.
If you have too many monthly financial commitments, banks would not consider your application. During your application, they can track your loans. They can detect your credit loans, car loans, and more, so you cannot keep it a secret from them.
If you desperately need a loan, you can still get approval, but you might have to repay the loan in longer tenure. This can lower your monthly payments. You may also ask the moneylenders for other options for your repayment system.
Overall, to prevent getting rejected with your loan application, you should fully understand your bank or lender. Also, try to pinpoint some of those factors that might apply to you.
Try to improve those negative factors first before applying for a loan. This will help give you a better chance of approval.
Krishna Murthy is the senior publisher at Finance XOD. He is not only the senior publisher but also the owner of Tricky Finance. Krishna Murthy was one of the brilliant students during his college days. He completed his education in MBA (Master of Business Administration), and he is currently managing the all workload for sharing the best banking information over the internet. The main purpose of starting Tricky Finance is to provide all the precious information related to businesses and the banks to his readers.