When you need money quickly, it can be frustrating receiving declined decisions. You may start having the feeling lenders don’t want to help you, however, there could be some simple reasons why this is happening. Rather than left wondering why, here are 5 common reasons you are being rejected for a loan you can check today.
- Applying for the Wrong Type of Loan
It can be easy to apply for the first loan you see, however, due to different eligibility requirements and types of loans, not all will meet your needs. If you are someone with existing debt, for example, this may reduce the number of lenders who can help. You may want to consider debt consolidation loans UK lenders if you are looking to settle your debts and have one creditor instead. This is a more specific need for those wanting a simpler way to improve their financial outlook. This is very different to a payday loan, for example, or other short term options that will only allow smaller amounts and shorter repayment terms. Apply for the type of loan that matches what you need, rather than randomly choosing a lender.
- Multiple Applications Too Quickly
The temptation when you have been declined is to keep applying for other loans until one says yes. However, this will only make your situation more difficult and even increase the number of declines you receive. This is because your application history will appear on your credit file, so when you apply for a loan, the lender will be able to see this information. This will influence their own lending decision and it may appear you are desperate for money with many failed applications. It is best to give some time between applications where possible.
- Not Having the Affordability
Quite simply, if a lender cannot see you can afford the loan, they will decline your application. This is true whether you have a good or bad credit history. Lenders ideally want to approve those who present the least amount of risk, so that they can minimise any arrears or defaults from happening. If you apply for a loan without knowing how much you can afford, you are running the risk of being declined straight away. Spend some time working out your affordability by comparing your income and expenditure and then you can apply with confidence. You may discover you have very little disposable income, so review and cut back on non-essential spend where possible and improve your chances.
- Low Credit Rating
A low credit rating can be one of the main reasons for a declined application. Some lenders may use automated lending processes, meaning they will filter those with low credit scores. The more you apply for loans, the more this can affect your credit rating, especially if receiving multiple rejections. To avoid harming your credit rating further, identify lenders that can help those with bad credit first. This type of lender will focus more on your affordability than your credit history, improving your chances of approval.
- Incorrect Information on your Credit Report
One reason that is less obvious than others is potential errors on your credit file. When a lender accesses this to provide a lending decision, if they can’t find all the information they need, this can influence a declined decision. This is where periodically checking your credit report can help you and identify any potential issues. Something as simple as an incorrect address history can have a big influence, and you may also discover information that could be out of date, such as a credit account you’ve settled still appearing. Contact one of the credit reference agencies and access your report to double-check.