5 Reasons Loan Applications Get Rejected

There are many factors banks or any other lenders consider when judging the ability of a loan applicant to repay the loan. Among them are job and income stability and credits reports. Many people are nowadays having their loan applications turned down because of a range of reasons, some of which they can easily remedy.

While bad credit can bar you from getting any loans, some lenders are offering bad credit loans. This can be seen through www.everyday-loans.co.uk for instance, who have been offering straightforward financial solutions to borrowers for years, irrelevant of bad credit history. However, this does not mean that a good credit score is not necessary or useful for general loans.

Here are five reasons you can have your loan request denied.

  1. Poor Credit History – A poor credit score is a major reason many people get their loan applications denied. Lenders usually go through your credit file to find out your credit history which includes the details of any outstanding loans, your loan repayment trend, credit cards, etc. Having a poor credit history as a result of, say, a pending payment or a defaulted loan will result in a rejection.
  2. Loan Serviceability – Lenders want to be sure you can repay the loan. So before approving your loan request, they find out the size and security of your income. This is especially true with bad credit loans. This enables them to determine whether or not you will afford to service the loan promptly. If, for instance, your income is not as large as a lender expects or you are in a 3-6 month probationary period, then the chances of getting that loan are reduced.
  3. Missed Payments – This is one of the reasons for poor credit ratings which prevents you from getting loans, especially unsecured loans that solely depend on creditworthiness. Missing to settle credit charges, bills (like telephone bills), insurance premiums, or loans suggests to lenders that you are unreliable and perhaps financially irresponsible. Missed payments leave a mark on your credit file that stays there for six years. So even if you are financially stable right now, lenders may get concerned that you will do the same thing again.
  4. You Have No Credit History – As noted earlier, lenders use credit reports to determine your reliability. When you don’t have a credit history at all, it means you don’t have any debt repayment history to show that you can responsibly manage the loan. While you may be debt-free, you can be turned down because, understandably, lenders want to see a credit file demonstrating that you can service your loan diligently.
  5. If You Have Had a Loan Application Rejected Before by Other Lenders – Each time you apply for a loan, the lender will search your credit report, and this is recorded in your credit file. So, if you had a loan rejected previously for whatever reason, a bank might take the same grounds to deny your application. Again, applying for a loan from many lenders within a short period may suggest you are overburdened with debt, something that can quickly result in a denial.

To sum this up, it is worth noting that your loan application may also be denied because a lender targets specific groups of people in which you don’t fit. Again, before applying for a loan, see to it that you are on the electoral register. Lenders often use the register to find out if you are the person you say you are to avoid giving loans to fraudsters.

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