Loan Denied: Basic Reasons and How to Combat Them

• Loan Denial in Simple Words
• Loan Denied for too Many Inquiries
• Loan Denied After Pre Approval
• Loan Denied at Closing
• Auto Loan Denied after Approval
• Loan Denied for Bank Account Activity
• Loan Denied for Low Credit Score
• Why do I Keep Getting Denied for Loans?

Online borrowings are gaining more and more popularity today. It is a fast and reliable means of solving financial difficulties. In advertisements and slogans of companies offering this service, online loans look like an island of hope. Everyone has turned away from you and we are ready to help you. And it is such a disappointment if this type of loan turns its back on you. Today in this article we will look at the main reasons why you are told no even if you have a more or less decent credit score.

Loan Denial in Simple Words

Represents a denial by the lender of a loan. As a rule, this action is argued by the potential borrower’s inability to repay due to, for example, a small salary or a low credit score. However, as practice shows, these above-mentioned reasons are not always the main reasons. There are a number of other reasons that influence the lender’s decision not in your favor.

Loan Denied for too Many Inquiries

If loan suppliers see that there are too many requests for loans from you, they will automatically consider you a risky borrower. It’s very simple math. Seeing all of your many attempts at rejection they will realize that there is something wrong with you because you have been told no by an impressive number of lenders. And even before the stage of checking your documents, they will have an opinion about your insolvency. So what is the number of loan requests that are not critical? So, it should not exceed 2 times in the last 6 months.

How to reduce the number of applications in order to get approved at the right hour? The answer to this question is already inherent in the question itself. If you do not have an urgent need to buy something, if your relatives can provide financial assistance or if you have time to earn money and save up for your need, then do not apply for loans. And then when there will be no possible options for help and it will be urgent to realize it boldly send an application.

Loan Denied After Pre Approval

The reason of such denial can be usually explained by the following: you’ve taken additional line of credit. Remember the previous rule, the less open credits you have, the more chances of approval are. One more possible reason is that you haven’t provided the loan supplier with all the necessary documents. For example, you put conditions that they will give you a loan, but you need to provide one more document. But you didn’t. One more reason that must be mentioned is the change of job. And it turned out to be that the salary is less competitive in comparison with the previous one. And again the decision can be not in your favour. Finally, your credit score has changed and not in a good way. To avoid such an unpleasant situation you are to pay your entire bill on time. Talking about two previous points, you must be more attentive to the demands of a creditor and try not changing your job and if you changed the salary mustn’t be lower than the previous one.

Loan Denied at Closing

Unfortunately, such things can occur right before signing the agreement. Again the main reasons are the following: dramatic changes in your credit score (that’s why let us highlight once again that it is crucial to pay off all your existing debts and pay on time the bills). Additionally, it can be explained by sufficient changes in your income and funds not to the better. The best remedy in this case, of course, is to monitor these parameters and not let them be changed to the worse.

Auto Loan Denied after Approval

Such things are not frequent, but still they can happen. It is a must to take into account two important things:

1. before signing a contract it is imperative to study the conditions under which the loan can be denied after preapproval and approval, in particular.
2. remember that preapproval doesn’t serve as a guarantee of your approval.

Just like in previous cases the reasons for such decision are the following:

1. you’ve lost your job so for a lender your ability to pay off the amount taking is a daunting thing;
2. your income has become lower in comparison with the previous figures;
3. unverifiable information contained in your documents. In your application mustn’t be shadow info. Every change in your job, position, salary is to be clear and transparent for the lender. Otherwise, you risk to be denied.

Loan Denied for Bank Account Activity

Citing this kind of refusal as a rule, loan suppliers argue that you have negative balances, or a history of overdrafts or problems verifying your identity. To avoid such problems in future it is necessary to control the balance of your account and make sure that you have enough money to cover the payment amount.

Loan Denied for Low Credit Score

It is considered to be quite a popular reason. There exist so called red flags for creditors. If your credit score is less than 579–300, it is poor. And it is the prime reason why you can’t be approved. Unfortunately, it is really so. To be on the safe side we suggest you the following scheme:

• don’t postpone your payments as they have negative impact on your score;
• pay off your existing debts. The negligence of the rule portraits you as not a reliable borrower and makes lenders to make a decision against you;
• get a secured card. It is a proven method to increase your credit score. It has a certain limit and doesn’t allow you spend more than it is set.

We must warn you that you shouldn’t anticipate fast result. It can take 2-3 months before your credit score improved. But the result itself will be rewarding. Remember, your target is at least 660–601. It is so called fair score. Usually such numbers are used as a green light for many lenders. And, of course, 780-661 is no doubts welcomed by all creditors.

Why do I Keep Getting Denied for Loans?

This usually happens for a number of reasons:

1. you still have not done a good job on your credit score;
2. the lender may have doubts about the reason for your loan;
3. your salary level does not match the terms of the loan;
4. a high income-to-debt ratio.

Final Thoughts 

Alison Bennett

Alison Bennett is a licensed Loan Officer working in pdl247 for over 3 years.

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As you can see from the thoughts above there are many pitfalls in the process of taking out loans. We do not recommend that you resort to taking out loans every time you need them. Try alternative ways. In order to take a loan in the hour of need and without other possible options. Before submitting your application make sure that all the information provided is valid. You should not hide your true purpose of taking money. Check your credit score. And most importantly make sure that you will not have any difficulty in repaying the loan in the future. It is these simple guidelines that will allow you to take advantage of this opportunity and get the maximum benefit and efficiency from it.