The market is full of lenders offering a whole lot of loans for every possible financial need you can think of. But that doesn’t mean whenever you’re in need of funds you’re sure to get a loan. As much as it is common to be approved for a loan, so it is to be denied one. And it’s never fun when your loan application gets rejected. When that happens, what should you do? Firstly, calm down. Then consider a proactive approach to improve your chances of approval the next time.
What can you do when your loan application gets rejected?
Step 1: Evaluate the reasons.
Lenders are usually ready to explain why your loan application was not approved. Some of the most common reasons for loan rejection are poor credit score, limited or no credit, too much debt, and insufficient income. If your loan was not approved for one or more of these issues, address them before you apply once again.
Step 2: Put yourself in the lender’s shoes.
Analyze the lender’s point of view and find out what it is that the lender is looking for. Get a free copy of your credit report and check for red flags in your credit. If you were denied a loan based on correctible issues, make sure you correct them. For example if you do not meet the minimum income requirement, try to apply through loan programs meant for low or moderate income borrowers. If your credit score is low, try to improve it by paying off some of your debts before you reapply.
Step 3: Consider other strategies.
If you’re applying for a mortgage or auto loan, making a larger down payment may help you get approved. Similarly, for a business loan using collateral may improve your chances of approval. To get approved for a personal loan you can try getting a co-signer. These simple strategies can save you from rejection once again. More importantly, if one lender rejects your application, it doesn’t mean every other lender would do the same. Lenders have different approval standards, and you may stand a chance of being approved by another lender. So, also consider applying elsewhere.
Step 4: Make improvements for the long term.
Your immediate need may be to get approved for a loan. But to benefit in the long run, you should take care of your financial health. Paying down or paying off debts, making timely payments, boosting your credit score, and improving your income- all these go hand-in-hand and contribute to a better financial future.
No doubt rejection causes a great amount of stress and makes you feel helpless. But when you’re faced with that situation, it’s important to relax and consider your options. Understand the gap between your expectations and the lender’s perception, and try to narrow it down. This can save you a lot of time and frustration when you apply for a loan once again.