You have submitted a loan application and are already looking forward to the capital, but then everything will turn out differently. The loan is declined and you have to rethink. This is very annoying, but not a reason to despair.
In many cases, there are many things you can do to increase your chances of getting a loan. What? We’ll tell you in this article. Here you can find out why a loan can be rejected and how you can safely get an alternative installment loan.
Why can a loan be declined?
As part of the lending process, the bank checks the applicant’s creditworthiness for security reasons. She convinces herself of the liquidity of the customer to ensure that the customer can repay the loan. If the bank finds arguments against the applicant’s solvency, the bank rejects the desired loan. The reasons for this can be of various origins. The most important criterion is the applicant’s creditworthiness.
Negative Credit Bureau entries, as well as professional uncertainties, are indications of possible insolvency of the borrower. For example, if you are still in the trial period, you have a low income or have just started your own business or founded a company, the professional situation can have a negative impact on your creditworthiness.
The same applies to open return debits on your bank statements, bookings from debt collection agencies and the overdraft of your overdraft facility. But age also plays a crucial role in lending. As an applicant, you must be of legal age and must not exceed a certain maximum age.
Possible reasons for a loan rejection include:
- You are over a certain maximum age or are not of legal age.
- You are a student, unemployed or in the trial period.
- You have a temporary employment contract.
- You are self-employed for less than three years.
- The desired loan amount is too high compared to your income.
- You have negative Credit Bureau entries.
- Open return debits are noted on your bank statements.
- You have bookings from debt collection agencies.
- You have overdrawn your overdraft facility.
- You provided incorrect information on the loan application.
If a bank declines, does that mean I can’t get a loan from any bank?
If your loan application has been rejected, you shouldn’t give up hope. You still have a good chance of getting a loan from another bank. Each bank can determine the criteria for lending itself within a legal framework and set them individually in its general terms and conditions. Some banks are stricter than others, so you should just try your luck again.
Our tip: First find out why you did not get a loan and use the criteria set by the bank to prepare yourself for the loan before you apply again. We also recommend that you do not submit a new loan request to the bank that rejected your request. If you absolutely want to take out a loan from this bank, then you should wait at least six months between inquiries.
Creditworthiness is the linchpin of borrowing
The credit rating is the most important criterion when lending. It is a summary of your creditworthiness and provides information on whether you can pay the credit installments due. The worse your credit rating, the more likely your loan application will be rejected.
The following applies: Many different factors influence your credit rating. This includes your employment, the amount of your income, existing loan collateral, the Credit Bureau score and other liabilities that you have to repay.
If you are in a poor position to apply for a loan, there are a few things you can do to increase your chances of getting approval. A second borrower may step in for you. Basically, you have the option to apply for a loan with a second borrower. Perhaps your parents or partner have a higher credit rating and are ready to take out the loan for you or with you or to guarantee your loan.
What can I do to get the loan?
In some circumstances, it may be enough to reduce the loan amount. This lowers the monthly rate and increases your solvency. Basically, you should make sure that after deducting the ongoing rental and living expenses from your income, there is enough money available for the monthly repayment of the loan.
In any case, you should check your Credit Bureau entries. All information is not always correct. Take the yearly chance to get a free self-assessment. In this way, you can check your Credit Bureau score and have any incorrect information deleted or corrected.
In addition, you should check the information on the loan application carefully. The bank notices incorrect data at the latest with the Credit Bureau information and can also trigger a rejection of the loan application. Better be honest. Specify all of your liabilities and, if necessary, request rescheduling of all open items.
If the measures mentioned so far do not help, you can increase your loan collateral. For example, you can take out life insurance or deposit wealthy items such as real estate or vehicles as security. Also always pay attention to good payment behavior. Always meet your payment obligations on time, avoid return debits and overdraw your checking account as rarely as possible. This is how you express financial reliability and increase your prospects for a loan.