Rejection of loan application is embracing because you rely on the expected financial help. In most of the cases, the applicant doesn’t know the reason for denial before applying. By knowing the loan rejection possibilities in advance, you can go ahead with investment plans.
What are the primary reasons for loan rejection?
Can you tackle the reasons responsible for loan application rejection?
- The too high requested loan amount is the common reason for application denial. Reconsider the requested loan amount to minimize it. If the lesser amount can’t serve the purpose; don’t agree for borrowing. Instead, think for a mortgage loan. Paying the down payment is a good trick to reduce the effective loan amount. You may apply for less amount loan and can apply for an additional loan, provided, you pay the previous loan on the time for months. No guarantor long-term mortgage loans are available even for high value as the credited money is secured against the pledged asset.
- The absence of guarantor for the short-term low amount loan may be a reason for application rejection. Arrange a guarantor for the short-term personal loan. A guarantor must know all the terms and conditions of loan deal as well as your financial condition. Guarantor too must have good credibility. The guarantor loans are given because of guarantor’s credibility. Instant decision guarantor loans are cheaper and have better approval possibility.
- A low credit score is a major reason for loan application rejection. Check your credit score by self through free to use online tools; if you find it low, think to improve it. Experian, Equifax and Credit Score are the top credit score agencies used by most of the lenders. Credit score ranges the credit score from 300 to 850; higher credit score brightens the approval prospects. Almost 55% of lenders use Equifax to check your credit score; 77% direct use Experian for credit score rating. Therefore, you too must use these agencies preferably. The credit score can be improved by paying small amount debts and also by removing the unjustified bad entries left over by mistake.
- Absence of regular income proof is another reason for loan application rejection. You must arrange the income proof before applying for borrowing. Bank account statement helps you get the most sought after payday loan, 12 months installment loan etc. Retailers often face problem in proving the regularity in income because of a mix of season. The solution to this problem is to apply at direct loans dealing in business loan specifically.
- Bankruptcy remark is sure to make the borrowing task more complex with high denial possibility. Equifax, the leading credit score rating agency, keeps the record of bankruptcy on the credit report at least for six years. The other credit score rating company, TransUnion, reflects bankruptcy on credit report for 6 to 7 years. Lenders hesitate to lend to a borrower with bankruptcy remark. If you have been declared bankrupt within the last seven years, the chances for denial are pretty high. The only way to deal with this loan application denial reason is to wait for the reaming period and to request the agency for removing the remark.
- The debt-to-income ratio is also responsible for the acceptance or rejection of loan application. It is the ratio of debts and earning. The DTI should be around 43% to get the loan approval. If the pending monthly debts are more than the income, you have a high risk of application denial. The only way to manage this risk factor is to pay off some debts or to improve the income with consistency.
- Mistakes in information on application form make the lender suspicious and the application is rejected. Many loan applications are rejected because of having wrong or irrelevant information. Serving the correct and authentic information is just to get fast approval because the most of lending agencies use the online tools to verify the served information. Here, having correct name and address in an electoral register is a must.
Can You Apply Again If Loan Application Is Rejected Once?
Yes, you can apply again if the loan application is rejected by one lender. One reason for loan application rejection at one lender may not act same at other lenders. Different lenders have their own criteria to approve or deny the loan application; therefore, you have opportunities to apply at another lender but correcting the identified loan application reason. Applying at multiple lending agencies at one time doesn’t affect your credit ranking but if you apply for a loan too frequently at multiple resources, it does.