I Need a Loan but Keep Getting Declined: Why?
Nobody likes rejection. For example, when you can’t get approved for a loan, it feels like one of those invite-only situations where your name fails to make it to the list. It begins to feel like a loop where your loan application keeps getting declined every time.
In this guide, we take a look at the reasons why your online personal loans keep getting declined. We will go a step further to describe some viable tips you can utilize to minimize chances of rejection.
How to Identify the Loan Denial Reasons
Over 75% of all payday loans are rejected. Typically, money lending services come up with specific criteria to process loan applications of all kinds. Getting approval is dependent on your ability to fulfill most (if not all) of these requirements.
Usually, the moneylender will try to state their denial reasons clearly. This is often communicated directly by word of mouth or indirectly via email, text message, and postal mail.
However, most applicants fail to grasp the meaning in such technical explanations, leading to a higher level of stress and confusion.
You can access a free credit report from one of the three main credit bureaus: Equifax, Experian, and TransUnion. A few factors are calculated to result in a numerical value ranging between 300 and 850. A score below 580 is deemed lousy credit caused by:
- Bad credit score
- Having a short credit history
- A high debt to income ratio
- An adverse event on your credit report
If you have been doing one or some of the above, then no need asking ‘why can’t I get a loan?’ Here’s why.
Bad Credit
You seem to have exhausted all tactics and applied almost every trick in the book, but you get turned down for a loan everywhere. And you can’t seem to understand why. Simple – check your credit score.
Bad or low credit is the number one reason most people can’t get a loan anywhere. Your credit score goes down every time you fail to pay a debt on time or owe too much money.
Income vs. Debt Ratio
Some kinds of loans consider the DTI ratio, which measures your monthly gross income against your debt total. A high ratio indicates you might struggle to pay back the debt.
You’ll keep getting denied for payday loans if the lender suspects an inability to repay.
A Short Credit History
When the system does not have comprehensive data to analyze your borrowing and payments, it becomes difficult to calculate a credit score.
A Negative Event on Credit Report
Sometimes, a perfect credit score can be affected by a single event such as foreclosure. Moneylenders take such factors into account to determine your suitability as a loan candidate.
What Next After a Lender Rejects Your Loan Application
Suppose your loan application is revoked due to one reason or another; what do you do next? Should you reapply? If so, what steps should you take? And how long should you wait between applications?
Here are a few proven strategies to help you minimize the rejection rate.
Boost Your Credit Score
You must understand how your FICO Score defines your financial life. Only then will you be able to build your credit score.
Once you get to the higher ranges on the credit scale, opportunities to obtain no turn down personal loans increase. Additionally, try credit cards to build your credit report.
Take a Payday Loan
Also known as cash or check advance, the amount is calculated depending on how much you earn. In July 2020, the Consumer Financial Protection Bureau (CFPB) ratified regulations around payday loans.
So I won’t be shocked if I need a payday loan but getting refused. States like Arizona and New York City prohibit the disbursement of payday loans.
Even scholars like D. Lynn DeVault, chairman of the Community Financial Services Association of America, support payday loans.
Consider Other Options
Look into alternative options like borrowing from family and friends. There are also other short-term loans you can access.
You can also reduce your debt by settling some debts you have. This lowers your income to debt ratio, making it easier to access no denial personal loans.
What to Do if I Need a Loan ASAP but I Have Bad Credit
Having bad credit can be pretty frustrating, especially when you desperately need a loan. You can access one credit score free report yearly to keep track.
These queries are becoming more common by the day. But there is light at the end of the tunnel if you have had some financial missteps before or haven’t had enough time to grow your credit history.
The best thing would be to try and improve your credit report, but sometimes the situation is dire, and you need a loan asap. If that is the case, there are various loans for bad credit you can apply for, like:
- Peer-to-peer lending. These loans are funded by individual investors, usually on an online platform such as Prosper. However, the exorbitant interest rates are a significant downside.
- Installment loans. You receive an upfront lump sum that you pay back a specified amount within a certain number of months.
- Home equity line of credit (HELOC). The amount of loan is dictated by the amount of equity you have in your mortgaged home.
The good news is your bad credit doesn’t last forever. You can work your way out of bad credit and stop getting your loan denied. Vice president of communications at the National Foundation for Credit Counseling (NFCC, Bruce McClary, says that a prior negative account doesn’t have a lasting influence on future credit reports.
A little word of caution, be wary of predatory lenders who target loan applicants with bad credit scores. Their interest rates can go as high as 20%. You end up paying back much more than if you went to a credible lender.
The Bottom Line
Do you need a loan having been refused everywhere? If loan denial is something you’re dealing with right now, consult with a financial expert to recommend viable options.
With a bit of work, you’ll soon be getting congratulatory messages of approval from money lenders.
Have you ever been denied a loan before? What did you do? Let’s know in the comments section below.
References:
Carl Packman is a researcher, broadcaster, and writer. He wrote several books, including Loan Sharks: The Rise and Rise of Payday Lending, which comments on personal debt and finance issues. Also, Packman wrote Payday Lending – Global Growth of the High-Cost Credit Market, which reviews the growth of the high-cost credit industry from the early 1990s. He boasts a BA in Film and Philosophy from the London Metropolitan University. Carl Packman is a valuable contributor on our platform, sharing great insights into lending. He has helped improve our website by doing his authoritative preview of different topics.
Applying does NOT affect your credit score!
No credit check to apply.