We understand that it’s really disappointing to receive any form of rejection; and an application for a loan is no exception to this rule. Whether it’s a personal loan, or a business loan, know that the rejection is nothing personal and it doesn’t mean in any way that your business or dreams aren’t valid. A lot of times if you dot your ‘i’s’ and cross your ‘t’s’, you’d get that seemingly elusive approval.
This article is here to acquaint you with some of the general reasons why loan applications are turned down. So, I’ll do my best not to mention the fact that E-Finance offers the quickest loans at the best rates, and just write a general analysis.
So, some of the most common reasons why loan applications are turned down are as follows:
- MINIMUM INCOME REQUIREMENT NOT MET: I’m sure you’re already familiar with the way loans work; The lender gives cash to the borrower to settle some pressing need, and the borrower in turn pays back gradually at an agreed interest rate and time. However, for this to work seamlessly, the borrower has to have the ability to pay back the money at the agreed time. For this reason, the lender might set a benchmark amount as the minimum monthly or weekly income for the borrower to have in order to be seen as having the ability to repay. The minimum income requirement may vary depending on the Lender. If an applicant does not meet this requirement, then the application would most likely be turned down.
- YOU ARE HIGHLY LEVERAGED: This is really just a fancy way of saying that you have other unpaid loans pending. Every lender wants to be sure that you have the capacity to pay back. Yes, you passed the minimum income check but if there are too many payments to make, someone might be on the receiving end of sob stories. To avoid this, the lender company will analyse the loans pending against the expected income before making a decision.
- INABILITY TO PROVIDE SUITABLE GUARANTORS: You’re probably wondering to yourself; why do I have to provide a guarantor? Well, this requirement is usually applicable for online loan companies that do not request for collaterals, like us here at E-finance. This criteria is used in cases of business loans. The nature of business in itself is risky and while we appreciate your sheer bravado and almost precise calculations, the lender would need a guarantee that you can pay back. Thus, the guarantor. The lender company specifies the requirements for an eligible guarantor.
- YOU’RE OUTSIDE THE TARGET DEMOGRAPHIC: This is very important. A lot of people spend time applying for loans that they shouldn’t even bother to. It’s like applying for an undergraduate scholarship whilst doing your PhD; no matter how important your work is, you just don’t qualify for that scholarship. That’s the same thing with loans, it might be targeted at people of a certain geographic location, nationality, age range, occupation or even industry. If you don’t fall into the target demographic, then your application would most definitely be turned down.
- YOU DIDN’T FILL OUT THE APPLICATION PROPERLY: This is actually more common than you think. Sometimes, it’s so bad that the lenders don’t even receive the correct contact details. In applicants’ hurry to fill out the information, they forget to correctly fill out the necessary details or fill them out wrongly. Some lenders actually frown heavily on that, because it gives the impression of disorganization and begs the question; whether such a person would be organized enough to plan his finances well and make the necessary payments.
- TERRIBLE OR NON-EXISTENT FINANCIAL TRACK RECORD: This right here is the last part; the lender needs to see your financial history. Is there a track record of steady income? Have you taken a loan before? Did you pay back in time? How soon after payment does your account get red? All these help them make an informed decision. Now, whether they approve or disapprove depends on their internal regulations, however, when you take that deciding power away by not giving them your financial records, then your application is most likely going to get rejected.
The list we have here is a general list that cuts across most lenders; from banks to other financial institutions, there may be other standards set by individual lender organizations. A good tip would be to understand that they are organizations with structures already set in place, and whilst like E-Finance, they might want to help you Live Your Dreams, they also want to recover disbursed funds as amicably and drama-free as possible.
That being said, don’t be afraid to reach out to ask questions about loans and find out about any packages or requirements.