Frustration hits you when a loan provider rejects your loan application. You resort to borrowing because of some financial problems, but 100% approval can never be guaranteed. Well, this is a common scenario, and you are not experiencing something extraordinary.
Instead of focusing on the lending decision, figure out the aspect that did not work in your favour. Different factors can play the role of a negative catalyst in your borrowing process.
- Poor credit scores
- Unfavourable affordability
- Inappropriate loan amount request
- Not able to provide collateral or a guarantor
- Past record with loans is not good etc.
Take note of the reasons why you have confronted this type of situation. Working on them can help you improve your chances of getting. If you start to follow the necessary steps to upgrade your credit scores, you can get a better deal with a personal loan.
For example,
Your credit scores are somewhere between 720 and 779. In that case, if you choose a 3-year term, the average personal loan rate might be 12.50%. Besides, with a 5-year term, you will have to pay 14.5% interest.
Now, if your credit scores are above 780, you can qualify to get 8.92% with 3-year term and 10.91% with 5-year term.
You can see how the likelihood of getting better rates increases with better scores. Not just that, the lender finds it less risky to offer loans to someone with favourable credit scores. Direct lenders can be a great saviour for any borrower who has begun the journey of credit improvement.
Ways to improve the chances of getting approval for loans
Do you know even incorrect information in the loan application can cause rejection? Private lenders have simplified the process by letting you fill out an online form. Instead of overlooking its significance, you must focus on providing valid details.
Do not hurry up to get funds as early as possible. A single mistake will be enough to ruin your chances of getting loans. What can you do to enhance your chances of application?
Compare between secured and unsecured option
Oftentimes, you forget to assess if the other loan option is offering some flexibility. Maybe you are looking for an unsecured loan as you are not ready to sacrifice your assets. However, because of poor scores, the lender considers your profile as risky to lend.
In this situation, you can consider the option for a secured loan. The loan provider will get security as assurance for loan payments. On top of this, they might get ready to offer feasible rates.
Lenders | Secured loans | Unsecured loans |
Lender A | 6.59% | 10.99% |
Lender B | 7.49% | 13.7% |
Lender C | 8.49% | 12.99% |
Here, you can easily find how the rates of the three lenders are different. It further varies depending on your preference to pledge collateral or not. Thus, the acceptance chances have a lot to do with the loan payment assurance.
Look for suitable loan options
Now, if you are already struggling with your low credit scores, rejection will be a common outcome from different lenders. Instead of randomly looking for lenders, you must choose specific ones who can help you.
For example, you can search for a loan with no credit check. These loans allow you to apply for the desired amount without revealing your credit scores. The basic working structure of these loans revolves around affordability.
If you can convince the lender of this factor, you have a good chance to get approved for loans. Here, the loan provider would conduct a soft search to assess your affordability. These checks do not affect your credit scores, as you must have seen with hard checks.
The primary purpose of it is to help the lender confirm if you can pay back loans or not. For this reason, the lender will not pay heed to your credit history. This provision is mostly available for payday loans, which are mainly income-based funding opportunities.
Lower your debt-to-income ratio
This is another strong reason that prevents you from getting loan approval. It clearly shows the amount of debt you have as compared to your earnings. Now, if you have more outstanding to meet than the financial sources available to you, this is a problematic situation.
It indicates that either you are not earning adequately or you are spending money mindlessly. This situation demands your immediate attention. This is because you are going nowhere but leading to debts.
What should you do then? You must strive hard to downsize the pile of debts. It will gradually help you recover your financial situation, and the ratio will become low. When debts come under your control, the lender considers it a favourable state.
This also means you can save money for important purposes like loan payments. One effective way to do so is by implementing a budget system, which allows you to segregate income and expenses.
Besides, this arrangement will help you channel your finances to optimise your financial situation.
Try to create additional sources of income
You must reach out to direct lenders in the UK because of the flexible features they offer with loans. Unlike mainstream loan providers, they do not focus only on earnings from direct employment. They accept any sustainable form of income that can ensure successful loan payments.
Now, if you are earning from self-employment or a part-time job, you might try out amplifying your earnings. Although you are able to meet your expenses, you cannot create sufficient savings. For that, you must find out additional avenues to earn money.
Instead of working on a single project, take up two or three projects. You can make additional money that you can utilise for loan repayments. Private loan providers are concerned about the factors that can help you repay loans on time.
Avoid applying for too many loans
You might have come across a lot of suitable offers. Out of curiosity, you have applied for them all. If they are offering a pre-approval facility, there is no problem.
However, if you have opted for a straightaway application, you will enter into trouble. Direct application would require the lender to validate your credit scores. If you have done the same thing with multiple lenders, credit checks are going to take place multiple times.
The impact of it on your credit history will be huge. For this reason, wait for a few seconds before sending the application. It will give you the time to see if you are applying for a free loan quotation or not.
There is no harm if you think of utilising the pre-approval facility with different lenders. This step will not cause any harm to your credit records. To pre-qualify, you do not have to reveal your credit scores.
Get a guarantor
If you are in your worst financial phase with very poor credit scores, you cannot prove your affordability as well. In that case, you should be prepared to get a negative reply from the loan provider. Find a guarantor who must have great credit scores and a stable source of income.
They can take responsibility for paying back loans on your behalf. Getting them can improve the likelihood of receiving a positive reply from the loan provider.
The bottom line
You can easily understand the necessary things to do to convince the lender. For that, research and find out the reasons behind getting a rejection for a loan.
Williams Adams is the Senior Content Writer and Loan Advisor at Loansevents. He is passionate about finance writing and has written thousands of blogs for the top platforms worldwide. In more than 13 years of experience, he has worked with leading lending firms in the UK providing various loans. At Loansevents, Williams does the major task of writing researched-full blogs on multiple loans and financial concepts. He has done MBA in Finance in the UK to back his finance skills.