Being denied a personal loan is irritating and sad, especially if there is a financial emergency and you need money right now. Whether you’re trying to get a loan directly from a bank or using a more convenient service like GetCash, there could be a number of reasons your application was rejected and several things you could do to fix it.
Common reasons for rejection of your application
Low credit score
Your credit score and therefore your credit history is the first thing considered by any lender before deciding whether to approve or reject your loan application. If you had a history of missing payments in the past or had credit issues like bankruptcy or collections, you may have less chance of getting a loan now.
Unstable or insufficient work history
When reviewing your loan application, lenders want to know if you have had consistent income over the past few months or even years. If you did, it most likely means that you will keep it in the future. So, if you recently changed jobs or worked as a freelancer for several employers at the same time, this could be a reason for your loan application to be rejected.
High debt to income ratio
The debt-to-income ratio, usually referred to simply as DTI, is the total amount of your debt divided by your monthly income. You can easily calculate it yourself. You should sum up all your debts, including credit cards and student loans, and divide them by your monthly salary. If the ratio is below 40%, you can consider your DTI to be healthy. If it’s higher, it could lower your chances of getting a loan approval. This could be the case even if you have never missed a single payment and have a stable income and a decent credit score.
Income below threshold
In most cases, lenders tend to require a minimum income that you must meet in order for your loan application to be approved. The income requirement varies by lender and loan amount requested. To avoid having your application rejected, be sure to mention any sources of income you may have, including child support, investment accounts, side jobs, etc.
Missing information
Sometimes the reason for a rejected loan is as simple as that. Some information or documents may be missing, or there is an error in your application. While some lenders might not pay attention to it, others will reject your application without a second thought.
What to do if your loan application is rejected
The first thing to remember is that the rejection of your application is not the end of the world. You can always try again, but first take a look at our tips – they might increase your chances of approval.
Find out why your application was rejected
You will receive a rejection notice with the exact reason in most cases. Reviewing it is the first thing to do as it can quickly clear up the situation and help you understand your next steps.
Improve your credit score
If the reason is a low credit score, there are several ways to improve it. It’s easy if you just lack a credit history. In this case, you can get a credit card or log into your parent’s or spouse’s account, provided their credit rating is better. If the problem is missed payments, a high DTI ratio, or too many recent loan applications, it can take time and money to improve the situation and therefore your credit score.
Request a lower amount
It might be worth applying for a smaller loan. These loans are considered less risky and have a higher chance of being approved. Also, smaller loans are easier to repay, so starting low might be a good idea. Paying such a loan on time will improve your credit rating and history and allow you to apply for a larger loan next time.
Get a co-signer
Some lenders allow you to co-sign a loan with another person who has a better credit score or higher income. This can help you secure a larger loan if your income is insufficient to convince a lender. Remember that a co-borrower will have to repay the loan if you don’t, and these loans may have additional terms to consider.
Try other lenders
It doesn’t hurt to shop around. If one lender has rejected your application, there is no guarantee that the next one will. Try different banks or lending companies, compare their offers and find the one you can negotiate.
Authors biography :
John is a financial analyst but also a man with different interests. He enjoys writing about money and giving financial advice, but he can also dive into relationships, sports, games and other topics. Lives in New York with his wife and a cat.
