What to Do If You Are Knocked Back On Your Loan Application
If you’re thinking of submitting a loan application, there are some things you should consider before you apply. By knowing some of the things the banks look for in a good borrower, you can increase your chances of being approved.
What To Do If Your Loan Application Is Declined
If you’ve ever had a loan application declined, you will know how frustrating it can be to try and work out what went wrong. Bank staff aren’t always the best at explaining the exact reasons why you might have had your application refused, so many customers go away feeling confused and angry at the greed of lenders.
Rather than give up, take a little time to learn about what banks look for in good borrowers. This can help you present your loan application more favourably and increase your chances of being approved the next time you apply.
Regular Income
If a bank is going to lend out money, they need to know they’re going to get it back. This is usually why they ask for verification of income details, such as pay slips or employment contracts or tax returns.
Providing as much income verification as you can helps to show the loan assessors that you do have a regular income and you are able to keep up with the repayments each month.
Stable Employment
Some banks have policies in place for larger loan applications, such as mortgages, that require customers to demonstrate that they are employed in a stable job. This means showing that they’re not just temporary or casual staff, but actually permanent full-time or part-time employees.
While it’s more likely your loan application will be approved if you can show stable employment history, it’s still very possible to get a loan approved if you are self-employed or a temporary or casual employee. However, you should expect to verify that you have been in the same or similar industry for a substantial period of time, such as more than 3 years.
Savings History
Depending on the type of loan application you’ve submitted, some banks may ask to see evidence of your savings history. This is especially true if you’re applying for a mortgage, although it usually won’t matter if you’re only applying for a credit card.
Your savings history doesn’t necessarily have to be cash in a bank account, although this will increase your chances of being approved. You could also provide evidence of any extra repayments you’ve made on personal loans or credit cards and this can count towards savings.
Credit History
Most people believe that you need to already have some kind of credit rating before you can apply for a larger amount of money. This isn’t true. In fact, most banks will happily lend money to people with a regular income, a savings history and no credit history at all, as long as they meet the right criteria.
If your loan was refused and you have a regular income, you might want to consider what’s in your credit report. Your credit report contains information about where you might have applied for credit previously. It may also show records of any defaulted payments, court judgements, insolvency or bankruptcies.
So if you’ve had your loan application rejected or declined, consider some of the above points. Look at your own situation and try to figure out what you could change or strengthen to improve your chances of being approved next time.
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