If you are into applying for a loan, there may be times when the loan is rejected. The lenders will not provide you with the right reason for your loan rejection. But you can find out by putting up a request to the lender.
If you do so, the lender provides you with an exact explanation of your loan rejection. Before applying for a loan, it is essential to understand the factors that fall in the category of eligibility criteria. Some criteria are different from other lenders.
You have to be specific and make sure to fulfil all these criteria. Sometimes your loan purpose is not acceptable to the lender. They may reject the loan for an acceptable loan purpose.
It is crucial for the lender to be upfront with the borrower. Along with other factors, the lenders also check your credit record.
But many lenders do not tell you exactly what they want. They may not let you know their exact eligibility criteria. You have to shop around before going to your lender.
Increasing your Chances of Approval
Sometimes the lenders accept your low credit scores as well. Hence, these criteria differ from lender to lender.
It is always good to find a lender that lends to a profile like yours. For this, you need to do your research. Try to shop around and check with the lender that suits your feasibility.
If you find the right lender for you, you can easily borrow small business loans also. Along with personal loans, business loans are a good option to go with.
The Reasons for your Loan Rejection
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The credit score is too low
Whenever you are applying for a loan, your application may be rejected on the basis of your low credit score.
You may not think it has low, but lenders may find it low compared to their other borrowers. Every credit rating agency has its version of your credit score. These pet score also mean differently to different lenders.
However, you can check your credit score and go through a free trial. This will give you a clear picture of your credit score.
If your credit score is not up to the mark, there are very few lenders who give you loans. Ensure to check your credit score whenever you approach any lender.
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Too short credit history
If you have a shortcut history, this can also hamper your loan approval process. Many lenders look for an established credit history along with a higher credit score.
They may look for a borrower who is involved in a few years of paying off the debts. You may have bleak chances of getting your loan approved with a short credit history. Many people apply for personal loans in Ireland.
They do not consider their credit history and just go with it. Make sure to have a good hold on your credit history before getting into the scenario.
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Your income is not good enough
Your income is one of the most significant factors that drive your loan approval process. If the lenders get to know that you are not making enough money, you may not at all be considered for the loan. There has to be a bare minimum level of your income.
All the lenders do not advertise these criteria, but they mean it. Many lenders look for the minimum income requirement in their borrowers.
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You are already in too much debt
If your debt levels are already high, you may not be approved for your loan. This is referred to as the debt to income ratio.
It is a critical factor in your loan application. If the lender feels that you may not be able to repay their loan on time, you are out of the league.
Many of the borrowers have a debt to income ratios at a higher level. Hence, always check with this ratio before coming to any of the lenders. They may not be verbal about it, but they mean it.
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Your self-employment
If you are self-employed, sometimes it can be difficult for you to prove the sturdiness of your income. Everything is dependent on income.
If you have a good source of money, you will be able to repay the loan on time. But if there is no steady income, it can be difficult for you to make your repayments. Hence, most of the lenders reject the application of self-employed borrowers.
Although it is not the case every time, it may have a chance. Some lenders take caution and avoid borrowers who are self-employed.
Ways to Improve your Loan Approval Chances
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Do not apply before checking your approval status
If you are rejected for a loan, do not apply without checking your approval status. If you are rejected once, it still can work.
But multiple loan rejection are a big hindrance to the loan approval process in future. Hence, check your approval status first and then apply for any other loan.
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Keep on checking with different lenders at one time
If you are blindly following one lender, do not waste your time. Instead, check with several lenders at one time. Whichever suits you best, go for it.
There is no harm in checking with multiple lenders at one time. These lenders have a website which has a button to find the loan. You can check this option with different lenders and choose the best one.
Making a comparison is the right way to apply for your loan. Applying to one lender and following them blindly can be a time-consuming process for you.
To save your time and money, check with different lenders.
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Know your credit history and find ways to improve it
Your credit history is crucial while you are opting for loan borrowing. Be aware of your credit history and try to improve it.
If your credit history is not very good, you can find different ways to improve it. You can also take help from professionals and improve your credit score. If you are not doing it so, it can work against you.
The good news is that you can quickly fix your credit score if you want to. For example, get yourself into the electoral roll and make a good image of yourself.
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Check with your details before applying
Before you apply for your loan, double check your details. These details include your income, credit score, credit history, repayment capacity etc.
If you are not aware of your details, it can go against you. Whatever details you have, try to improve them if it is required. Along with these details, check with the documents that are required.
If there is any document missing, you may have to get again into the process. It is advisable to put all your documents in one place before your process starts.
Many people are rejected due to the absence of one small document. Do not fall in this category, and be prepared for it beforehand.
Conclusion
If you are facing any loan rejection in your life, do not let that affect you. Instead, you can find ways to improve your chances of loan approval.
Before applying for your application, make sure to check all the documents and requirements. This will ensure you have a high chance of your loan approval.