Being rejected for a personal loan or for a mortgage can not only hurt your credit file, but your feelings too. It becomes even more upsetting if you are struggling financially and you were depending on an approval. Don’t give up, instead use this situation to learn more and then work towards improving your chances and your credit file.
Financial institutions can reject loan applications due to several reasons. Below are some of the common reasons people may receive a declined for their credit application. Your current credit score: one of the factors a credit provider considers when assessing and application is the credit score of the applicant(s). If your score is viewed as too low by that lender, then it could be the reason or part of the reason for your decline. The credit Score required is determined by the lenders themselves. The Credit Score can vary between lenders and also Credit Reporting Agencies like VEDA.
- Defaults: if you have any defaults on your credit file (a payment that hasn’t been made for which debt collection process has commenced), then you might be declined for a loan. This can be for paid or unpaid defaults.
- Insufficient income: when you apply for credit, the lender needs to ensure the repayments can be met without financial difficulty. If you can afford the loan based on the lenders criteria or prove the income based on the lenders criteria they will not approve the loan.
- Asset and Liabilities: lenders will review your current financial situation as a whole. This also includes you Net Asset Position. This means your total assets LESS your total liabilities. DO you own more that you owe? And by how much?
To give yourself the best chance at a loan approval know your information and also speak to a professional. Mortgage Brokers can be the difference between a decline and an approval. They know lenders criteria better than the general public as well as they know how lenders are assessing loans at the time.This is not a guarantee of an approval however you can save yourself time and a possible decline by going to someone who deals with lenders every day.
By making sure that you have all the facts about your situation and gather your documents and to increase the possibility of getting approved for your next application, the following steps can prove to be helpful.
- Understand why you may have been rejected: the first step towards financial recovery is to know where the problem lies. Get a copy of your credit report to find out what you did wrong and which debts or mistakes need attention. WhiteStar are happy to obtain a report for you subject to meeting our criteria.
- Reduce your current debts: this is a good way to improve your affordability as well as your credit score. If you can make some advance payments or reduce credit card limits.
- Consider debt consolidation: if your debts are all over the place, try to consolidate some or all together. Debt consolidation helps those who have multiple loans and struggle with making many repayments in a month. With one repayment, it becomes easier to get out of debt as well as easier to manage.
- Apply with other (non-traditional) lenders: some lenders are very particular with credit score and other lending criteria and other lenders offer more flexibility. If you can afford slightly higher repayments and you really want the funds consider applying with sub-prime lenders. The interest rate might be a little higher or the terms and conditions could be different, but the chances of getting approved may increase.
Applying for a loan can be stressful, but being rejected is annoying. If you feel you can afford the repayment and you are looking to refinance your mortgage or get a new mortgage, contact WhiteStar for chat about your lending needs. We will chat with you and hopefully be able to explain your options and possibilities clearly to you.