If you’re in need of a loan, there are certain requirements that every lender needs in order for you to be approved.
In some cases, your loan application could be denied which can be extremely disappointing and even stressful, especially if you’re certain you should’ve been approved.
Read on to learn about five of the most common reasons for personal loan application denial so you can be prepared before you submit your information to get the money you need.
1. Your Credit Score is Too Low
Whether it’s a home mortgage, a credit card, or a personal loan, your credit should be in decent shape before you submit a loan application. If the score is too low for your lender’s parameters, the loan will likely be denied.
Luckily, there are a few things you can do to make sure that your credit is in good shape before applying. First, pull your free annual credit report and get a copy of your current FICO score so you know where you stand.
You should also ask your bad credit loan lender what their minimum credit score requirements are before applying. Don’t be afraid to shop around since different lenders might have different limits in terms of borrower score minimums. Your best line of defense is to get your credit score in good shape before you submit your loan application.
2. Low Income
Of course, you’ll need to have some form of income before you can get any type of no credit check loan or other credit. If your income is too low, the loan may be denied.
Some lenders look at your debt to income ratios, similar to how they might if you were applying for a mortgage. If your current bills are too high in proportion to your income, the personal loan could be denied.
Create a budget and try to figure out how much money you’re taking in each month versus how much is going out. If the totals look to be a bit “lopsided” and you’re spending too much in comparison to what you make, it’s time to reconsider your financial situation. You will either need to make more money or pay down some bills before you apply for the loan to be sure everything looks good on paper.
3. The Reason for Your Loan Application is Unsatisfactory
You might think that getting a personal loan no credit check should cover you for anything you want or need. However, in some cases, the lender may require that the loan’s funds are designated toward a very specific expense.
Make sure that the loan you’re interested in allows you to use the money as you see fit. If not, your loan application may be denied since the reason you’re borrowing money is not in line with what the lender requires.
You could also be denied if it shows that you’ve already taken out several loans in the past and they still are not repaid in full. A lender will consider you high risk if you have a history of applying for and receiving several loans for several reasons. Be very clear about your reason for borrowing and if you’re planning to use the funds to pay for a car or pay down debt, let the lender know.
4. A Shady Payment Past
Anyone lending you money wants to see that you’re a reliable borrower, and missed payments will raise a serious red flag. Make sure that you have a clean, consistent payment history with your other creditors before applying for a loan.
If you have a background of derogatory marks or collections, it’s likely that your loan will be denied. Always be sure to pay everything on time whether it’s a credit card payment or a utility bill.
Strong borrowers have a solid history of making payments on time. This shows the lender that you can be trusted to pay them back, too. The lack of payments can affect your credit score, so this goes hand-in-hand with the information the lender will see when they pull your credit information.
5. Not Enough Job or Credit History
If you’re just starting out and you need a same day payday loan, it will be more difficult to get approved. That’s because most lenders need to see a consistent history of employment as well as credit repayment on your loan application.
For people who are new in the job market or who have been unemployed for a long stretch of time, getting approved may be an uphill battle. Ideally, you should be at the same job for around two years or longer before you apply for any kind of personal loan or another form of credit.
The same principle applies to your credit history. If you just got a credit card one month ago, you might not have enough to show the lender that you’re established and trustworthy when it comes to your creditworthiness. Time and patience is the key to getting your loan application in a good place for better chances of approval.
Don’t Give Up
If you’re worried about the status of your loan application, don’t panic. Try to get your credit score and income to a good level before you apply for a cash loan so your odds of approval are much higher.
And, if you’re denied a loan, remember that the lender must tell you why. Use that information to make improvements and then try again in the future for a better chance of success.
Visit our website today so we can help you find the best solutions for your credit needs, and see our FAQ page for help with some of the most commonly asked questions.