Imagine applying for a loan to purchase your dream PC, only to find out the bank rejected it. A plot worse than most horror movies, right? Talk about unwelcome news. Before you do it yourself, it sounds like the simplest thing ever. You need an amount; the bank lends it to you, and you pay it back later. What could go wrong? But the finance world is incredibly complex, and there are many parts in the equation.
When you think things can’t get more frustrating, the bank provides zero explanation for declining you. It’s only logical that you need to know why, but some institutions choose to withhold that information. Of course, some will give you detailed argumentation about why you’ve been rejected, but that’s not always the case.
Instead of banging your head against the wall in despair, it’s far more productive to know the reasons why. Banks aren’t just loitering all day long, waiting for people to show up for cash. They have strict and clearly defined rules of play, and the only way to reach your goal is through compliance.
Knowing what criteria you need to meet will save you a world of trouble and headaches. Plus, you will get everything done way sooner. Visiting https://forbrukslånet.com/ will provide you with a more complete insight.
More Than Meets The Eye
When assessing a customer’s eligibility for same-day loans (or any loans, for that matter), banks consider a number of factors. Perhaps you thought that being employed would be enough for a loan. I have a steady job, you say, so I must be eligible. But that’s only a part of it. You might also assume that, since same-day loans are usually low amounts, there won’t be any problem. But that’s not good enough, either.
This is far from some evil masterplan of conniving banks to damage you on purpose. Looking from their perspective for a moment will give you a more complete picture of the situation. Having a clear procedure for granting loans helps banks protect themselves against potential debtors. By employing clear granting policies and sticking to them, they ensure that nobody will abuse their trust. Though some rules may seem unforgiving, it’s nothing that cannot be remedied.
Most institutions apply more or less the same regulations for unsecured loans, so let’s delve into the matter without further ado.
Factors to Consider
When it comes to securing a loan, it helps to know a thing or two about banking operations. For instance, they conduct a hard inquiry with each applicant with the credit bureau. It means they check your credit report thoroughly to see if you’ve already applied elsewhere. If you did, more than once, and without being granted, the prudent bank will likely think there’s a problem and will keep away.
Age and income are pivotal when applying for loans – rarely do you see a ten-year-old leaving the bank with a proud smirk on their face. The minimal age for application is 18 in most cases, but some banks refuse to lend unless you’re 20 or above. That’s the easy part. Income is where it gets a bit more complicated.
What Does Your Account Say?
Without a fixed monthly income, securing a same-day loan is virtually impossible. Providing proof that you’re financially capable to some extent throughout the year is the quickest way to earn the bank’s trust. Whether it’s regular salary, freelance earnings, bonuses, commissions, or dividends from investments – the source is irrelevant as long as there’s regular income.
Having said that, a steady monthly salary is clearly the best indicator of financial stability, particularly for loans. Some banks even set requirements for gross annual income as a shield against irresponsible borrowers.
Next, we have the question of existing debts. This one is pretty self-explanatory. No bank is willing to grant money to a person with a high debt-to-income ratio. Even if you’re actually able to repay without any delay, this can quickly turn against you.
Let’s assume you have an $80,000 yearly income but set aside $5,000 monthly to repay debts. You can see how alarming this sounds and reads. If you were the bank official deciding on this loan, you would probably point to the door.
About the Credit Score
So far, we have covered age, income, and debts as factors in loan rejection. If you add your marital status and assets, you get something known as a credit score. It is typically measured on a scale from 350 to 800, or sometimes 0 to 100 – the numbers may vary. The credit score is perhaps the clearest indicator of your personal finances. It takes all things into consideration and gives an overall result.
This number plays a huge role in your loan application. Before picking apart all your categories, bank employees will look at the score and roughly estimate where you stand. Having a very low credit score is a synonym for rejection. In theory, a low to medium result can grant you a loan, though with a high interest rate. A high credit score is an ideal scenario for a sure loan. Besides implying financial stability, you will get lower interest rates than usual.
The Notorious Payment Notice
Here’s yet another obstacle to getting a loan you might not be aware of. Whenever you default on a debt, credit report agencies register it in the form of a payment notice. It means you still have outstanding debts, which is always bad news for banks, much like irregular incomes or low credit scores.
To ensure they are not going to default, banks run checks on all applicants, including payment notices and active collection cases. Now, the bank might disregard a single notice and proceed with the loan. But if there is more than one, rejection is almost inevitable.
Before applying, you should carefully inspect your finances and see if you’re falling behind in some way. That way, you won’t face unpleasant surprises in the form of a rejection letter.
Bankruptcy and Overdrafts
These two are also red flags that could thwart your efforts. If you have filed for bankruptcy in the last few years, the bank will likely say no. Even if you managed to bounce back up and fortify your finances, you could still be considered high risk. However, they might overlook this hindrance if all other factors are satisfactory.
Overdrafts can be troublesome, too. If a creditor tried to draw money from your account, and there wasn’t enough, that’s called a dishonored payment. Such information is always readily available, putting you again in the high-risk category. Multiple overdrafts lead to a guaranteed rejection, so it’s best to check it beforehand.
Clearing the Way
Other than the above factors, you might deal with citizenship issues, Veritec-type checks (some US states employ third-party system checks to ensure the settlement of loans), etc. Most people aren’t aware of these things when asking for loans, but you can find all the necessary information online, deal with shortcomings, and apply successfully.
A loan rejection is not the end of the world – far from it. If nothing, it shows precisely where you’re at financially. The more you know about your situation, the greater the chance of getting your money. There’s no such thing as too much precaution, anyway.
