What to do if you cancel your loan application
Loans are great helpers when it comes to quick access to money, easy and paperless application and reliable online lenders. The online application is what grabs the attention of potential borrowers.
Who needs conventional banks with their queues and high fees when you can fill out an online form and receive the loan money the same day?
However, sometimes lenders or borrowers cancel online applications. What are the reasons and what implications can it bring? Find out here.
Why do borrowers cancel their loan applications?
According to Trans Unionthe number of applications for unsecured personal loans increased from 15.7 million to 20.9 million from 2017 to 2020. This means that the demand for personal loan options is steadily increasing.
Despite the wide availability of personal loans, borrowers can sometimes have doubts about their loan applications. Various repercussions can follow this decision and borrowers must be able to anticipate difficulties.
Regardless of the type of loan, it is always best to weigh the pros and cons before applying for a loan. This is why there is a handy pre-qualification tool available on lending websites. Pre-qualification for a personal loan affects credit rating never. It is a safe procedure that borrowers can follow to ensure their ability to repay the loan.
The reasons for canceling the loan application can be different:
- Government financial assistance
- A monetary gift from friends or relatives
- Loss of current employment, i.e. loss of source of income
- Inability to repay the final cost of the loan
- Disagreement with the loan terms provided by the lender
Whatever the reason, it is essential to cancel your application before receiving the money from your bank account. In most cases, it sends a single message to a support chat on the lending website. In the case of mortgage loans, for example, it requires a letter to be written to the lender before signing the documents.
What information does the lender need to cancel a loan request?
If you wish to cancel your loan application, you must consult the loan agreement that you have in hand. The borrower does not have to specify the reason for the cancellation of the loan. However, when asking for your loan to be canceled, you need to be clear and make sure your request sends the right message.
The loan contract contains information on the termination clause and there are contacts to contact in this case. Always follow the steps in the loan agreement to cancel the loan request. Unless you understand the guidelines of the loan agreement, contact legal counsel.
What to do if you cancel your loan application
If you have not yet submitted the loan application, you can cancel it from your online account on the loan website. Sometimes you can see the current status of your loan application. Depending on this, you can cancel the application yourself or via a support chat.
Regardless of how you contact the support group or lender personally, there are certain things you should keep in mind. The loan website will need to know your full name, date of birth and application number.
When the decision in favor of the borrower has already been made, other consequences may take place. Some borrowers may allow “a window” to submit your cancellation request. Lenders may allow 5-14 days after loan approval to do so.
Cancellation of loan requests by duration
If the loan money has already been transferred to your bank account, the loan is mainly done in the traditional way. The borrower must return the loan money within 30 days from the date of the cancellation notice. Some lenders are willing to waive origination fees and interest on the loan. Note that you must clarify these aspects with the lender.
If the loan amount is not repaid within the claimed 30 days after notice of cancellation, the loan is considered accepted by the borrower and traditional loan features as the interest rate and any additional charges , where applicable, come into force.
In case if the borrower cancels the application because he has a better offer, he can inform the lender of this fact. Sometimes a lender may match the offer and the borrower may get a lower interest rate or better loan opportunities with the current lender.
If you want to stay in touch with the lender and reapply for a loan in the future, you can tell the lender not to delete your details and use them next time.
Does canceling the loan application affect your credit score?
Once you have applied for a loan, the lender may inquire about your credit history to base their decision on. Depending on the lender, this will either be a hard check or a soft check. If the lender does a thorough check and asks for your details from the credit bureau, it will lower the credit score a bit. It’s only temporary.
If you cancel the loan application before it is issued, your credit score will remain the same. If the loan has already been granted, regardless of whether you cancel it, the credit rating has also already been affected.
If you cancel the loan after having already used it a little, it can negatively affect the credit rating. To avoid negative consequences, you must pay the loan balance plus the interest rate. Foreclosure fees, processing fees and taxes of all kinds may be yours. Make sure you meet all your financial responsibilities before canceling the loan.
To sum up, canceling a loan is not a bad thing. The reasons can be many and usually there are no serious consequences to doing so.
However, there are things to consider before canceling the loan and there is a clear algorithm in the loan agreement to follow. Make sure you know your legal rights and responsibilities to not be fined for the money you refused to take.
