When times are rough, and you’re counting on a personal loan coming through to help you get out of a sticky situation, it can be pretty upsetting to find out that your application has been denied. But lenders have their reasons for rejecting a loan.
It’s best to figure out the reasons for your loan application’s rejection. This way, you can improve your situation for future applications and know how to act on it. Here are three of the most common reasons lenders would reject a personal loan application.
Low or Irregular Income
When lenders review your application, they will look at your financial status to determine if you have the ability to repay. If your income is too low and you’re asking for money beyond your paying capabilities, chances are, the lender will deny you a personal loan.
The same thing applies to irregular income. When you have irregular income, the lender does not see much certainty in earning enough to pay back the borrowed amount. It might be challenging to get a loan approved if you have a history of irregular income or just recently changed jobs.
Low Credit Score
It’s essential to have a high credit score as your credit score indicates the likelihood of on-time debt repayment. A low credit score can discourage lenders from approving your personal loan application. Not establishing a credit history or missing debt payment can lower your credit score. However, a low credit score might also be due to a credit report mistake.
Credit Application and Debt History
Your history with money and debt matter to the lenders. If they see that you’ve applied for a lot of new credit in recent months, this might lead them to reject your application. With tons of existing credit applications, the probability of not settling your debt payments on time increases. And if you already have a history of debt, lenders fear that you won’t be able to pay back the borrowed amount.
What to Do When Your Personal Loan Is Rejected
So, what do you do when lenders reject your loan? The course of action you can take depends on the reason for denial.
For low or irregular income, you can try to increase your earnings by taking additional work. If you have irregular income, it’s best to work on getting a stable employment history by getting a steady job. However, this will take time, so you won’t be able to apply for a loan anytime soon. If there is an urgent need for money, you can try applying for small personal loans or find a different lender.
When your credit score is the problem, you must find ways to increase it. One way to do this is to repay some of your debt. This will also help improve your debt history. You can also build your credit score by practicing responsible borrowing etiquette. Pay your debt on time and only borrow an amount of money you are confident you can pay back on time.
Your credit score might also be low due to mistakes in your credit report. So, it’s best to obtain a copy and examine it for any errors. Dispute any inaccuracies so they can be removed, or write a goodwill letter asking to remove a single late payment from your credit report.
Lenders will reject a personal loan application if they deem the borrower unlikely to repay on time. Indicators such as low and irregular income, low credit score, and bad debt history can deter an application from being approved. The best way to prevent a loan rejection in the future is to practice responsible borrowing.
If you’re looking to apply for ,installment loans in Decherd, TN, you can count on Mid-Town Loans to make the borrowing process quick and simple for you. We are not a payday or title lender, but we do understand that people have time-sensitive needs when short on funds. Make life a little easier, and apply for installment loans now!