Rejection is something that we don’t want to experience. It can be experienced on a large scale or in small ways in everyday life. Some of us have been through this awful encounter more than once from one's family of origin, a friend, or a romantic partner, desired job opportunities, and of course, loan applications. After being in such a terrible situation, you’d be eager to know why you were rejected - what you have done wrong. Of course, you’d wish to know what you could do to make it better on your next attempt, right? Life gets a lot sweeter when there’s no rejection.
In connection with this, after the failure of not getting your loan application approved, you’d want to try again. You need the money for a reason and it’s euphoric to accomplish it. So, it’s paramount that you understand the mistakes that you’ve committed when you submitted your application. To shed a light on this matter, here are the five major reasons why your loan application was rejected.
Incomplete or Incorrect Information
Prior to submitting your application, did you make sure that all the information was complete and correct? Lenders rely heavily on the information you provide them with - it’s like your resume. As such, a single missing data or incorrect one can create a negative impact on your application. Some of the errors can include out-of-date personal information or duplicate debt listing. Thus, it’s crucial that you always double-check the information before you submit it.
Keep in mind that that accurate file information is a critical factor in getting approved for a loan. You can obtain a copy of a credit report prior to your application, check the information and make amends if there are any errors or incorrect data. Byu doing so, you can increase the chances of getting your loan approved.
Insufficient Proof of Genuine Savings
Lenders are going to take a risk when they’re going to approve your loan application. Hence, it’s important that you provide them with sufficient proof of income or savings to help them determine your capabilities as a payer. Basically, if you can’t prove to them that you can knuckle down and save for a loan, then, don’t get your hopes up regarding the approval of your application. You see, it’s essential that you show them regular deposits into a savings account over 6 months.
A Large Amount Of Debt
One of the reasons why people take out a loan is to consolidate their debts. However, if you have a large amount of debt, the chances of getting your loan application approved is reduced. Lenders will look at the percentage of your income that goes towards paying your existing debt and assess whether you can cope up with the payments. If the debt-to-income ratio doesn’t seem to fit, then, rejection comes after. Given this, it’s better to reduce your debts first before applying for a loan to help set you up for success.
Employment is the common source of income for most people and lenders are keen when checking your employment situation. For them, it’s essential that you are able to pay for the loan repayments every month, thus, having stable employment is a must. On the other hand, If you’ve been changing your job every few months and unable to prove that you have a regular income, your loan application may be declined.
Poor Credit History
Your credit history is the first thing that the lenders check when you submit your loan application. It displays existing issues such as a poor repayment history on your current debts or overdue payments of 60 days or more. So, you would appear as a loanee who is not accountable enough to make timely repayments. With this, most lenders will decline your loan application since the risk is too high for them to take. Remember, making timely payments and paying your balances in full are two of the most important factors that can boost your credit score. So, better work on improving it first prior to taking out a loan.
To Sum It Up
When applying for a loan, we’re always hoping for the best. It feels good to get fast loan application approval but in order to achieve it, you need to work on your credit score and be sure to avoid the common mistakes stated above. Having a good understanding of the reasons why your loan application is declined will help you make an action plan. As a loanee, it is your responsibility to present yourself as a responsible payer and that lenders can take a risk on you.