It is common for loans to get rejected. Almost all of us have faced the ‘rejected’ stamp on our loan applications at some point in life.
Getting your loan application may feel like it is the end of the road for you, but there’s always hope. The most important thing is to know why your loan application got rejected.
Banks and other institutions typically provide reasons for why they rejected a loan. They cannot approve all loans for obvious reasons. But just because your loan got rejected today does not mean you can never have a loan approved.
You can work on the shortcomings and reapply to improve your chances of getting your application approved.
Let’s have a look at some of the main reasons why loan applications get rejected:
Insufficient income or poor employment record
Your income and employment record play a vital role in your loan application approval request.
Lenders want to put their money in strong accounts. This is important because they want their money back. They will reject your application if you do not have a job or any reliable source of income.
Stability is of huge importance here. The habit of shifting jobs every few months can have a very negative impact on your job application. It shows that you are not serious about working and hence may not be able to pay back the loan on time.
Good income improves debt to income ratio, which is important because most lenders consider this factor when approving or rejecting loan applications.
A Lack of Assets: List your asset records properly, also be prepared to show your tax payments for past several years. This helps in giving a clear picture to the lender about your financial standing
Incorrect details on application forms
The authenticity of your information, be it personal or professional, is very important. One cannot expect lenders to trust you with their money when you have lied on your application forms.
Double check all facts and figures to ensure there are no errors or mistake. Lying or trying to deceive the institution can get you into trouble.
Rejected loan application or a previous loan default
If you have been rejected a loan earlier or have failed to make timely payments on a previously obtained loan, it will appear on your credit report and reduce your chances of getting a loan approved.
A poor credit history
This is the most important factor. Most lenders consider the credit history when analyzing a loan application.
if you have credit card defaults, late repayments, credit utilization of over 40%, it is going to reflect badly on your credit reports and hence can be the sole reason of your loan application refusal.
If you have a bad credit score, you must look for organizations that do not require a very good credit score. For example, many institutions that offer unsecured loans also often give loans to applicants with a poor credit score.
It is all about doing some research and finding the right institution. Do not apply for a loan if you feel it my get rejected. A number of rejected loans can reflect very poorly on you record.
Instead, wait for your credit score to improve. It is a slow process but with the right steps you can bring an improvement to your credit score. The key lies in paying all your debt on time and not applying for a loan unless it is necessary.
Conclusion
Loans get rejected for a lot of reasons. The best option is to speak directly to the lender if your loan application got rejected and working on the shortcomings before applying for another loan. Sometimes, merely changing the lender can do the trick.