10 Things to Do If your Loan Application Gets Denied
Receiving news of a loan denial is never fun, especially when you really need the funding. But before you reapply, it pays to analyze your situation and understand why you got rejected in the first place.
This way, you can improve your financial standing and increase your chances of approval. Once you know the reason, go through the following steps to clear your finances and become a better potential loan candidate for next time.
- Fix any errors on your credit report. You should not be responsible for computer errors or faults by others. Have any mistakes removed and improve your credit score immediately.
- Clear you existing debts. Loans on top of other loans are simply not attractive to lenders. Reduce your expenses and instantly look better as a borrower.
- Offer to pay a larger down payment to increase your chances of approval. The risk will be lower for the lenders so they may be willing to approve your loan even without perfect credit.
- Using a collateral might help you get approved. Pledge a valuable asset to help secure the loan. Just remember that you can lose your asset, like a home or vehicle, if you fail to make payments.
- Look for a co-signer. If your income or credit is not enough, improve it by adding somebody else’s income and credit. A co-signer applies and takes on the loan with you. Both of you have equal responsibility in repaying the loan. Choose a co-signer that understands this risk completely.
- Apply to another institution. There are plenty of lenders out there who may be willing to look at other criteria apart from your credit and income. You do not have to wait before applying again after a rejection, maybe you just have to go somewhere else.
- Build a strong credit history. Borrow and repay loans on time. The better your credit history, the fewer rejections you will receive.
- If you are behind on any loans, clear them up fully. Take your payment plan seriously and heal your credit.
- Pay off old debts to increase the amount of your income that can go to new loans.
- Earn more! Increasing your income means a decreased need to borrow money. Lenders will approve your loan faster and see you as an ideal borrower.