Follow These Simple Steps to Avoid Getting Your Personal Loan Application Rejected
Wednesday, May 30, 2018, 6:00 PM | Leave Comment
It is not always obvious that a loan application will be approved. Sometimes loan applications are rejected for various reasons.
When you apply for a personal loan, it is with the hope that it will be approved. After all, you are applying because you need the money.
It is therefore important to figure out how one can avoid getting their loan application rejected.
Why do lenders reject some loan applications?
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Bad credit
If you have borrowed before and defaulted on payments, you are considered a risk. Since personal loans are unsecured, lending institutions may not want to risk banking on you. You are practically a flight risk. Defaulting on credit card payments affects your credit negatively too.
Your credit is also considered bad if you have borrowed too much in the past. That might come across as bad financial decisions and they may not want to risk that either. Before you apply for any loans, make sure you raise your credit score by ensuring that you have cleared all your debts.
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Your income may not support the amount you requested for
If your income is on the lower side, it may mean that you cannot sustain the monthly payments. Lenders have the minimum income they consider eligible for one to qualify for a loan. If yours goes below that, they will reject your application.
Make sure to find out what their minimum income is before you apply for the loan to avoid the awkwardness of being denied on account of your pay being too low. Visiting a website or several run by different banks will give you the information you need.
Alternatively, you can work out the repayments you need to make every month and see if your income can sustain them.
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For what purpose do you need the loan?
Lenders always want to know why you need the loan. With secured loans, like car loans, your use for the money is restricted to car issues only. There is even an age restriction on the vehicle you plan to buy.
Should the lender find out or conclude that you do not have credible reasons for requesting for the loan, it is most likely to be rejected. Asking for a loan to take someone out, for instance, might not be considered a plausible reason to give you a lone.
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Filling in the application erroneously
The details you put down on your loan application will be checked and verified. Putting in a name that is different from your identification documents will get your application thrown out.
Also, inconsistencies will be frowned upon and your application will not see the light of day.
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Your employment history
If you are constantly in and out of jobs, or do not seem to hold down a job for more than a few months, you are considered a flight risk. What if they give you their money and you fail to pay back what you owe?
Many lenders want proof of stability so that they can be assured that you have a source of income that will sustain monthly payments throughout the repayment period.
Your living arrangements might also come into play. If you are more or less a vagabond, they may not consider your loan application favorably.
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You have too many loans
The lender might not be convinced of your ability to sustain an additional loan if you are already paying off say, five others. Sometimes they will consider your net pay and decide if it is enough to take care of your monthly expenses and pay off an additional loan. There is no reason why you should overstretch your pay slip.
In order to get your loan approved, you need to:
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Know what your preferences are
It is always good to compare the products being offered by different banks. Get to understand the kind of loan that suits your needs and the terms of payment that would suit you. Note: read the fine print and ask questions if you do not understand it.
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Ask questions about the product in question
Once you have decided on the package you want and the bank or lender you want to work with, contact the bank directly. If you are conducting your search online, it is time for a face-to-face meeting so that you can discuss the intricacies of the product as well as ask for clarifications.
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Can your income support the monthly payments required?
You should know by now whether the package you have chosen is affordable. The bank or lender will let you know if your credit score is acceptable. However, their answer should be known to you because you should have made copies of your credit history prior to your loan application. If there are any errors in the report, make sure to get them rectified before making your application.
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Have a list of the documentation needed for the application
Check off the documents against this list to ensure you have all the documents needed. You need to get documents from your employer, creditors and other financial resources. If you have some documents missing, your application may be turned down.
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Be patient
If you are in a hurry to complete the application process and secure the loan, you will most likely miss some vital steps that could get your application rejected. There is a process that the loan officers must follow to check your information out, approve your application and get you your money. You are allowed to check in with them and discuss the process so that you have an idea of when to expect to have the funds.
Also, have an outline of what you need the loan for. This way, you will not use the money for unrelated purposes.
If after doing all this loan application is rejected, make sure you ask for reasons why. If there is something required of you, provide it. If not, wait it out and try some other time.
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You can run your search online via a website or several in order to find a few banks and other lenders whose products you can compare to have the advantage of choice. This way, you will end up with a product that fits your budget and your needs.
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