Getting a personal loan can be hugely important. It can be used to go on vacation, to buy a car, to carry out much-needed home renovations, or even to consolidate other loans. However, obtaining such a loan is not as easy as it once was, and there are strict criteria in place to ensure that the money is going to the people who will be able to pay it back. That can mean that you are rejected for a loan whereas in the past you wouldn’t have been. If you’re worried that you might be rejected, here are some of the main reasons why that might happen and what to do about it.
Bad Credit History
Having a poor credit history is one of the biggest reasons why you would be rejected for a personal loan. People can have poor credit for a variety of reasons, such as not paying back previous debt, having too much debt, or even being linked to someone who has financial issues. It’s a good idea to check your credit report before you apply for a loan to see what your score is; if it’s a low number, you will need to look at why that is. You may find that an error has occurred on your report, so you will need to get that fixed before you apply for any money.
If there is no error and the low score is due to your own past, you will need to either wait until your score is better or work hard to make it better.
When a lender decides whether or not to lend to you, they will look at how much you are earning to determine how easy it will be for you to make the loan repayments. If your income is not high enough, they won’t sensibly be able to lend to you, which means you need to do your research before applying. Don’t just pick an amount of money and ask for it; take a look at how much you’ll need to pay back each month and make a reasoned argument as to whether that is going to be possible or not. You don’t want to take out a loan and then be in financial difficulty when it comes to paying it off.
If you have just received a pay rise but it’s not showing yet, or perhaps you’ve only just started a new job, you can ask your employer for proof of earnings. If you work independently or as a freelancer, you could create a paystub to show what your income works out at, perhaps.
What The Money Is For
When a lender is looking at your loan application one of the questions they will ask is what the money is to be used for. Some loans (most loans, in fact) will come with a set of restrictions as to how the funds are allowed to be used, especially if you are applying for an unsecured loan.