Loan declined? All you need to know

Whether it is for the desire to renovate the house or because we want to change cars, to enjoy a thousand and one night holiday or – on the opposite side of the spectrum – for unexpected medical expenses, it is more than normal to find ourselves in the sudden need for a sum of money immediately available.

The reasons that lead us to apply for a loan are the most varied, but in any case we will have to make our loan request to one or more banks or financial companies.

 

Why a loan application is rejected, and what you can do?

Why a loan application is rejected, and what you can do?

The credit institution to which we have contacted will verify our income and balance sheet conditions, doing what is called creditworthiness screening. In the meantime, we will wait for the response for a few days – generally speaking 48 hours – already anticipating the possibility of doing that shopping or paying off that debt.

Unfortunately, a loan application is not always successful – that is, a loan application may fail. When a loan is refused, the most immediate consequence is that we will have to try to request it from another bank. Often, however, the first loan refused announces the rejection of subsequent requests.

Know that however in these cases all is not lost – quite the contrary.

There are different forms of loan on the market and if you have been refused one, you could get a different type of loan. The best thing is to ask multiple financials who will be able to make you estimates and advise you. Loan Here you can get a free loan quote from multiple credit companies, all by filling out a simple form.

But first let’s see why a loan is refused.

 

Why is a loan declined?

Why is a loan declined?

Let’s face it: not all ills come to harm.

In fact, if a first loan is refused to you, but you take the trouble to understand the reasons for the refusal, you can take those financial actions that will allow you not only to obtain a loan at the next request, but also to prevent your status from the Central Credit Register becomes negative.

Let’s go in order.

The bank is not required to explain to you why it has not given you a loan, but know that explanations will often not be denied to you.

The most common reasons for refusing the loan are

  • Your information is missing or incomplete. It happens especially if it is the first time that you apply for a loan, and you are therefore unknown to the Sic databases. The bank will not be able to verify your reliability, but will inform you of the reason.
  • You have too many debts to apply for another loan
  • You have negative reports (due for example to the late payment of one or more installments of another loan)
  • You’re asking too much money in one go
  • Are you the guarantor of a bad payer, or is your guarantor a bad payer himself or does he not have a financial position to honor the debt if you become insolvent

One of these reasons will cause the funding practice to freeze. The bank will not be able to do anything to satisfy you.

Likewise, your credit worthiness may be deemed ineligible for a new loan. The reasons?

  • Your income and assets are considered insufficient.
  • You are a worker “at risk”, that is, you are subject to a fixed-term contract, and that perhaps is about to expire
  • You already have substantial installments of a loan in progress (I remind you that their amount added to that of the loan installment you are requesting should not exceed 30-35% of your salary)

In the latter case, the bank is refusing your loan to avoid over-indebtedness.

As we have already told you, you need not worry if the loan is denied to you.

There are other loan solutions that you can also search for by filling out our loan application form which allows you to be contacted by up to three financials at one time.

 

What to do if you are denied a loan

loan denied

The important thing is not to lose your temper.

Secondly, you need to know that you can do something even if you are refused a loan. This is why it is essential to know the causes of refusal with the utmost precision.

Let’s see the various actions you can take.

  • If you have a negative report but you do not know you have made late payments, you can ask Crif where the report comes from, and then ask for the appropriate corrections.

Caution. Even when you make a loan request and it is rejected, you can be reported to the Crif for 30 days. Maybe without your knowledge: you will only find out by making a subsequent loan request (which in turn will be refused, perhaps for this reason).

In this case you don’t have to worry anyway. Even if the first feeling is to feel treated by bad payers, actually reporting to Crif in case of refusal of funding is a practice

  1. If you are reported as a bad payer in the SIC lists (for example, because you have paid at least two installments of a loan late), you must be removed from the list of bad payers.
  2. If the loan has been refused because of your employment contract, which is considered “at risk”, you can present documentation that reassures the bank or the financial company on the stability of your job. You can request it from your employer.
  3. If the loan or loan is refused to you because other loan requests are pending (which you may have completed online while looking for information on the best loan for you ) you can ask the institutions to which you have made the requests for a release with which it ensures that you you gave up.
  4. If the bank or the finance company believes that, due to the presence of other loans, you are not able to take on an additional monthly installment, you can study with the bank or with another financial the possibility of reviewing your debt situation. You can possibly apply for a new loan for a larger amount, which extends the repayment plan – the number of installments increases, but the amount decreases.

Do not withdraw credit only

I often see people’s opinion that the best mortgage is the one with the lowest interest. However, interest is not the only aspect that determines the profitability of a mortgage. The advantage of a mortgage is often influenced by the overall conditions under which you obtain the mortgage and the interest rate. You have to remember that even in banking is paying the famous “I do not want a discount for free”. Banks most often give a discount on an actively used bank account, credit card and credit / life insurance. It is also important to count on the monthly fee for loan management, which ranges from 150 USD / month to 250 USD / month.

 

The advantageous mortgage is not determined only by the interest rate

The advantageous mortgage is not determined only by the interest rate

To give you an idea of ​​how the conditions affect the mortgage’s profitability, I have prepared a table with a comparison of two offers while ensuring a 100% mortgage for the purchase of a family house.

Loan Amount USD 1,000,000
Due date 30 years
annual interest rate 3.89% 4.09%
Fee for provision of DGR 2 900 USD
Monthly fee for DGR administration 150 USD / month
Mandatory payments / insurance 932 USD / month 0 USD / month
Repayment of DGR 4 711 USD / month 4 826 USD / month
Repayment of DGR with fees 5 793 USD / month 4 976 USD / month
Total interest paid 695 944 USD 737 496 USD
Total paid 2 088 364 USD USD 1,752,844
APR * 5.86% 4.25%

APR Annual Cost Percentage Rate

money loan

Refers to the total cost of the loan, ie the rate that includes all expenses associated with the mortgage, ie. fees, interest, property insurance, life insurance, if required, etc.

The client received an offer from the bank of 3.89% under the conditions of opening and active use of the bank account and life insurance of the loan for USD 932 / month. As a counterproposal, we gave the client an offer with the condition of active use of the bank account. We also negotiated a discount on interest of 0.30% from the standard offer and reached the final interest rate of 4.09%. Based on data on the total interest paid, a higher interest rate of USD 335,520 is more advantageous. Everything is caused by the payment of monthly credit insurance, which increased APR from 3.89% to 5.86%.

The APR determines the overall advantage or disadvantage of loans.

money loan

However, this does not mean that credit insurance is bad and the only increase in costs / APRC. This is mainly increased by ancillary charges. The advantage of credit insurance is also given by the setting of this insurance and in the case of insurance directly from banks is not always the best solution.

The most common reasons for refusing a loan

A few years ago, a loan without proof of income was no big deal. By this we mean small loans before the payout up to a maximum of 5 000 USD, here you really did not need a bank statement or pay slip. It sounds good that almost everyone has reached financial assistance, but as a result it has led to a headless indebtedness of a large part of the population. Major changes occurred at the end of 2016, when the lending rules tightened sharply. Not only does every consumer credit provider need to have a permit from the Righthand Bank at the same time it is obliged to sufficiently verify the creditworthiness of anyone who will seek the loan. How do banks and other companies access our data that we make available to them? What are the most common reasons why a loan is rejected?

 

The higher the risk we pose to the bank, the lower the prospects

money loans

With every loan out, the bank and the non-bank provider run the risk of not being able to repay their obligations in a timely and sufficient manner. It is logical that they must eliminate these potential “losses” as much as possible.

Anyone who visits a bank branch or applies online should know what to expect and how best to prepare.

 

Almost every figure plays a role!

money loan

The loan as such is a very specific service and, in order to be paid, we are forced to reveal almost everything about ourselves. No wonder, it is a lot of money. The bank will be interested in whether you have any children, are married, have education, employment, job positions, net income and regular monthly expenses. A person who rents a two-room apartment will have a lower chance of success than one who lives in his own. The age of each client is also important.

A fixed-term employment contract is often a problem. Even worse is the situation when we are in probation or notice. Any income must be supported by a statement of account or pay slips.

The bank also does not forget to check your financial history, which means that it will look into all available registers and easily find out whether you are still paying any obligations, but also that you are late with payment for electricity or mobile services. The biggest problems with obtaining a bank loan tend to be:

  • retired
  • graduates
  • mother on maternity leave
  • People who pay off multiple loan products
  • people with a negative record in the debtors register
  • those who have been incapacitated for a long time
  • people in distraint or insolvency

 

How do I increase my chances of getting a loan?

How do I increase my chances of getting a loan?

You will not improve your prospects from day to day, but the sooner you start building your creditworthiness the better. Young people often wave their hands on a short-term loan and do not worry too much about repaying it, but they do not realize that due to a few thousand years later they will not reach the slightest mortgage.

So what can I do?

  • Pay on time and regularly all loans, leases, overdrafts and credit cards
  • Get organized in recurring expenses such as rental electricity, mobile services, and create a standing order so you don’t have to keep in mind that you’ve forgotten to pay again
  • Find a stable job with an open-ended contract
  • apply for a loan after your trial period has ended
  • educate yourself and strive for career growth
  • pay all overdue debts and then seek deletion from the debtors register
  • minimize your spending
  • apply for a special-purpose loan
  • invite a co-applicant or guarantor

 

Where to go if the bank does not lend me?

Where to go if the bank does not lend me?

With higher demands, fewer applications are approved and therefore a significant percentage of applicants resort to loans outside the bank. Non-bank loans seem tempting at first glance, but they look much more expensive. These providers take even greater risk than banks and therefore charge higher interest rates and all other costs. This does not mean that you will not find a bargain loan, but we recommend that you be more careful and consider in advance whether or not to accept such an offer.

 

Worth mentioning is P2P loans

p2P loans

A great alternative to a non-bank loan may be the so-called P2P loan , which sometimes comes out more favorable than the one in the bank. What’s going on? The acronym is based on person-to-person lending. In other words, individuals lend to people who are looking for a loan. Potential investors will receive interesting appreciation and clients will receive a favorable loan, all of which is covered by intermediaries themselves.