Steps After You Are Declined for A Personal Loan

Steps After You Are Declined for A Personal Loan

Do you feel like there is no hope because your lender said you did not qualify? If you are ready to give up when declined for a personal loan, don't. It may seem like all is lost, but the fact is that getting approved for a loan needs a lot of persistence.

A loan decline can come as quite a blow especially if you have always paid your bills on time and you are employed on a good steady income. However, do not let those feelings of hopelessness overcome you, there is always a way forward. Step back and examine things carefully. Here are five steps to follow when declined for a personal loan.

Step 1: Know your reasons for being declined

If a lender denies your application, the Fair Credit Reporting Act necessitates it to send you a letter, either by mail or electronically explaining why you were denied. This is the first step you should take. Carefully read the letter, in there you will see 'adverse action codes' or 'reason codes.'"


Reasons for denial might include

• Your credit score does not meet the lender's minimum standards.

• Your credit history is limited- If you have less than three years of credit, it will be difficult for many financial institutions to offer you a loan.

• Your debt-to-income ratio is too high- If a significant portion of your income is tied to paying other loans, your loan application may be denied.

• If another creditor reports that you are making late payments, other lenders are less likely to give you a loan.

 

Regardless of the reason the lender provides, this information will be one of your most valuable tools. You can start tackling them before applying for your next loan. The more details you can get from the lender, the more prepared you can be for the future. There may be instances where you can improve your debt-income ratio or credit history and even get approved for your personal loan with that same lender.

Step 2: Sign up for credit monitoring

When a lender gives you a specific reason why you were denied, it is recommended to make sure there aren't any other issues with your credit score or credit history that could get worse by the time you are applying again. Get credit monitoring services, most of these companies examine your credit report from the lender's perspective. They will gladly explain what matters, what doesn't, what you need to improve and how long you need to wait before applying for the next loan.

They even look for errors in your report, too. Sometimes, a credit bureau or creditor can commit an error that can negatively affect your credit report. Alternatively, it could be a fraudulent account somebody else opened in your name. The credit monitoring company can find something that's off, dispute it with the credit bureau and start the process of clearing up your credit report and become a better loan candidate.

Step 3: Create a plan

Once you know what issues you need to tackle, create a plan to determine what you need to do and how to do it. There is no precise way to do this because your plan will depend on the issues you need to address and your overall financial situation.

If you need to correct many things on your credit report, you can fix them one at a time to make things easier to deal with. You may start by focusing on your Debt-to-Income ratio. If that already looks good, then move on to your credit usage.

After these two, you should tackle the issues raised on your Adverse Action letter to see where other weaknesses may lie.

Step 4: Be patient

Depending on the credit issues you're fixing, it can take from a few months to more than a year to repair a credit report. Therefore you should not set unrealistic goals or have high expectations thinking it is a quick fix. If your expectations are unreasonable, you may get impatient, and get declined for a personal loan.

As you give yourself enough time to build a good credit report, keep track of your credit score regularly to see how your actions impact your score.

Step 5: Shop around

Once you get to the point where you feel comfortable applying again, you can go for personal loan shopping to see what chances you have for getting approved. Compare fees, discounts, and other rates each lender offers. Most lenders will allow you to look at their fees, rates and even run a soft credit check to determine whether you qualify.


Conclusion

If you follow the steps above, you will improve your chances of getting approved for any personal loan, from quick cash loans to long-term loans. You'll also increase your options of getting approved for other credit at reasonable rates, which can save you money on interest.

Similar Articles

loans

You might have heard the term “payday loans” before, but never really knew what that meant. Payday loans have roots that date back more than a century.

Personal Loan Eligibility

Personal loans are one of the most flexible forms of raising funds as these loans do not come with any kind of restriction on their usage. Whether you have to pay for the medical bills or you wish to go on a world tour, the borrowers have complete freedom to use the personal loans for almost any purpose they wish to

All You Need to Know About Personal Loan Eligibility Criteria

A personal loan is the first thing that comes to mind when we are in need of funds. The loan serves all purposes and helps meet personal needs, whether it is for home renovation or to meet an emergency medical expense.

Everything You Need to Know About Finance For Two Wheeler

Buying a two-wheeler is a matter of pride and passion. Most of us dream about buying a two-wheeler right from the day we start to earn. Two-wheelers do not come cheap and with the latest features and technology, they have become pricier. Manufacturers introduce new models from time to time and it can become difficult to take a pick.

daily-life-budgeting

One of the main things you should be doing is zeroing out your budget before each month. That way, you can look at every dollar you spend. This is known as 'zero-based budgeting.' While it doesn't mean you are zeroing out your bank account, it does mean you are accurately tracking your budgeting throughout each month.

Make the Most of Low Business Loans Interest Rate

All businesses need funds to grow and getting access to funds is easier said than done. If you are a business owner with aspirations to take your business to new heights, you are at the right place

Eligibility and Documents for a Commercial Loan

A commercial loan is a common form of borrowing in the country. The loan is usually short term finance that is offered to businesses to meet their operation costs and capital expenditures. A business goes through various stages where it needs funds to grow and expand.

approved loans

While we all try our best to live within our means, it doesn’t take much to put you in a situation when you need an injection of cash; it might be a sudden emergency medical bill, or your beloved car develops a serious engine problem or even an unexpected home-related repair. 

5 Things To Know About Used Car Loan

The world has become a different place due to the pandemic. Public transport is no longer safe, a lot of offices have not opened, and there is complete uncertainty about how and when things will return to normal. If you used public transport in the past, it is best to avoid it for some time now.