Why was my loan application denied?
Getting a refusal of a loan application is of course annoying, but rest assured, it happens very often. In addition to your financial situation, other factors may influence your loan application. The best way to increase your chances of success is to analyze your financial situation first. Here are the most popular reasons for refusal. Knowing them may help you avoid a negative answer.
If your debt-to-income ratio is too large, most creditors will consider you a risky client and therefore refuse your request. The debt-to-income ratio is the percentage of your monthly income (before taxes) that is used to pay your debts. If too much of your monthly income goes to pay your debts, it is likely that the creditors will refuse the loan, because in their eyes, the loan would only make your situation worse.
Credit history poor or absent
In order to get a loan, you need a credit history. Credit cards, for example, are a good way to accumulate more credit history. If you are afraid of credit history, it is unlikely that a creditor wants to make a loan. Before agreeing to make a loan, any creditor will look at your credit rating. The higher the rating, the more it shows the creditor that you are responsible for your loans. They will also check to see if you have any bad comments, such as bankruptcy, insolvency, reaching your credit card limit, and so on. Taking care of your credit history should be one of your priorities, as it may make it easier for you to progress in life, especially when buying a home or car.
Many investigations of your file
An investigation of your file takes place each time you make a new credit application. Unfortunately, having too much investigation of your file will work to your disadvantage when you apply for a new credit. Specifically, too many investigations are proof that you have tried desperately to obtain loans without being successful. This presents you to the new creditor as an unwanted client because the other creditors have refused you in the past. Learn more by clicking HERE.
Having an unstable job or not having a job at all are the two main reasons why loans are often refused. The creditors want to have at least a minimum of security when they make you a loan. Thus, your employment situation is often a way to reassure them. So if you do not have a job with enough income it makes you a risky client, which decreases your chances of getting the loan.
Accumulation of debts
If you are already having trouble repaying your debts and your payments are often late, it is highly likely that the creditor will deny you another loan. It’s hard to handle the extra debt, but once you get organized, put the payments back on time, once you’re on the right track, getting a new loan will be easier. . Use your credit refusal as a source of motivation to improve your financial situation and work to make it happen.
Member of a financial recovery program
If you are on the verge of bankruptcy or have enrolled in a financial management assistance program, then congratulations. You are on the right path to a better financial situation. Even so, you will still not be approved for a new loan. By being part of financial management assistance programs you will demonstrate to your creditor that you will not be able to manage another loan responsibly. Once you exit the bankruptcy situation and have completed your assistance program, do not hesitate to reapply to apply for a new loan.
Learn more about bankruptcy loans and the consumer proposal.
Collection of debt
A collection of debt is when you have a credit account (credit card or loan) whose payment deadline has long passed. Usually, in such a situation, the creditor has already sent the collection agents to recover his money. Having a debt collection is the worst thing if you want to apply for new loan. Most likely, if you are in such a situation, the loan will be refused.
Even if the new loan has been refused, you can still improve your financial situation soon. The first step in rebuilding your reputation is to understand why you have been denied. So, you could avoid the same mistakes and finally get the loan.