Your bank loan application has been rejected, right? I get a lot of people who have bounced on the door in the bank or received a horrendously expensive credit offers. Every day, I help readers find cheap cash, consolidation and mortgage loans. What to do if the bank refuses to grant you a loan? Before you act, you need to know the reasons for this decision. Of course, no bank will give them to you, which is why I wrote this article.
I have already served over 1,500 people during loan consultations, which banks have refused credit for. Based on such a large sample, I present to you the most common reasons for refusing cash and consolidation loans. In 95% of cases, one or more of these factors is the reason for the bank not granting credit.
Lack of creditworthiness
Read calmly and carefully. After this reading, you’ll become an expert borrower and you ‘ll never make the same mistakes again.
Everyone knows about it but not everyone understands what is meant by creditworthiness. Lack of creditworthiness can result from several things,
- Too high cash loan installments, which exceed 50% or 65% (depending on the income) of the borrower’s average monthly income, eliminate his chances of obtaining additional financing, for this, we recommend doing consolidation of its liabilities to reduce the monthly costs incurred to the maximum installments so that creditworthiness appears.
- If it is not possible to do consolidation then you should try to restructure your loans, which will also reduce installments.
- It is also a good idea to find an additional source of income or a person who could take a loan with you. Many people, unfortunately, overestimate their capabilities and indebted themselves beyond their productivity, which over time causes them to experience problems with timely repayment of liabilities.
How to estimate correctly your creditworthiness for a given type of loan I wrote here. To calculate your cash loan capacity, use my bank’s creditworthiness calculator.
The scoring is calculated by each bank differently, which means that each bank uses different algorithms to calculate it, it is a set of our personal data, which we provide when filling out the loan application, our score in Credit Checker is taken into account (see instructions on how to check your Credit Checker score).
Based on the scoring assessment, banks put us in the right customer groups and depending on which we are assigned to, we can receive such an offer (of course, you need to know what conditions can be obtained for a particular group, because bankers very often, despite good customer assessment, offer us loans with horrendous costs, because will receive a larger bonus for this).
In order to find the cheapest loan, use my loan comparators, and preferably individual consultation (you will find these things in the credit section of my blog) If the scoring score is too low then, unfortunately, the system will not give you any offer and you will receive a so-called refusal from the machine.
I get a lot of clients who have an employment contract, which ends after some time, e.g. in 6-12 months and immediately write in the remarks that it will probably be difficult to make a loan for them. Nothing could be more wrong, the minimum that some banks accept is an employment contract for a minimum of 6 months ahead, with such an agreement you can get a loan for up to 10 years.
There are also banks that pay more attention to the duration of the contract back or its repetition, for example, if the client has been employed in a given workplace for 12 months and during that time he already had two contracts, the latter ends in a month, the most you can get a loan for the maximum possible period.
Of course, most people use the offers of the bank in which they have their personal accounts, which very often causes a fixed-term employment contract to be a problem and for this reason they receive refusals.
Why do banks act so “defective” towards their clients? In fact, according to your risk model. However, there are banks, which I mentioned so, are more tolerant of fixed-term contracts. You just need to know which bank to hit in such a situation and which documents to store. However, I leave this know-how for readers who take loans via my credit consultations.
Too many credit inquiries
Many clients start playing the profession of credit brokers and go from bank to bank on their own asking for offers, bank employees very often ask for an ID card and signing the application motivating that otherwise, they are not able to provide a reliable offer (a bit in this reason there is) a person who will walk like this after 3-4 banks in one day and make inquiries to Credit Checker, in the next bank sometimes there is nothing to look for because the return message he will hear is a refusal.
In this way, banks protect themselves so that such a person does not receive several loans in a short period of time, unfortunately, Credit Checker is not an institution to which information from banks flows every day, so you can not see the loan that we took out on the same day.
For this, queries are reported immediately and it is immediately a signal to the bank that such a client may have just received loans from other banks. Of course, there are banks that accept more queries and take into account a period of two or three months. We also offer banks that do not pay any attention to inquiries. However, be careful and do not make too many inquiries in a short period of time, they also reduce our Credit Checker score, but more on that later.
I will only mention that virtually every bank has a grace period after refusing, e.g. you got a refusal today and for the next six months, you have no chance of a loan at this bank. Many people close their way to getting a loan this way.