If you require relief from your credit card debt or high-interest loans, you would be thinking in terms of a personal loan. Personal loans are offered by several credit unions and banks and they help you in consolidating your debts or refinancing them into a relatively lower-interest loan with a single fixed monthly payment.
Putting in a personal loan application is an easy process. All you have to do is simply filling in all your basic details. Then you must submit the application online for getting an instant or same-day approval. However, this super-quick application process may not be guaranteeing loan approval in any way. Remember that the bank or the lender would be verifying your application and then give their approval. So it is imperative to provide accurate details. Moreover, you must have a sound understanding of the reasons that trigger a loan request rejection.
Reasons for Loan Refusal
First of all, if your personal loan application has been disapproved, you need to carefully analyze the situation. Find out precisely why your loan request was refused. Lenders would be happy to explain to you what had gone wrong. Moreover, it is mandatory on their part to provide some disclosures. Let us examine some of the main reasons why your personal loan application for debt consolidation is not given approval.
Reason #1: Low Credit Score
If your credit score is low that is good enough reason to reject your personal loan application. A credit score ranges from just 300 to as much as 900. When your credit score is 750 or even high, your loan request should be getting a quick approval. However, you may still get loan approval with a bad CIBIL score. All you need to do is effectively boost your overall credit score by avoiding erratic loan payments, avoiding overuse of your credit card, and paying off all your outstanding loans.
As per https://www.forbes.com, “People use the term “credit score” freely. However, there is not just one credit score. FICO, the market leader, has many versions of its credit score. There is a rival generic score offered by VantageScore. And most banks will build their own custom credit scores that use the generic score as a variable.”
Reason #2: Incomplete Loan Documents
If you fail to submit all the relevant loan-related documents which would be proving your personal loan eligibility, your application may be rejected. Moreover, you simply cannot submit incomplete documents. You need to examine all the loan application associated guidelines meticulously. Follow all the instructions to the dot. Adhere to the suggested list of loan documents that are needed to be submitted. Keep a checklist ready to make sure that you have not missed out on any.
Reason #3: Unsteady Erratic Income
Lenders are very much interested to examine your capacity to repay. In such a situation, you simply cannot get a loan approval if you do not have a regular stable job. In the absence of a steady flow of income, the bank and other lenders would be compelled to assume that you would not be able to repay the loan consistently and in a timely manner. Try to avoid putting in a loan request if you have recently joined a new job. Suppose you are not having a steady job, you may highlight some other income sources if any like rental income, interest payouts etc. that should be sufficient to repay the debt promptly and in a consistent manner. Once your bank is convinced that you have the ability to pay off the loan, you would get loan approval.
Reason #4: Unfulfilled Eligibility Criteria
Apart from your income and identity, you must cater to certain other eligibility criteria that have been already set by your bank like ‘the right age’, ‘right location’, etc. Usually, you need to be from the same location or city as your lender or bank. All these reasons could spoil your chances of personal loan approval. It is best to seek professional assistance from reputed companies with impressive debt settlement ratings.
Tips from Experts to Boost Your Chances of Getting a Loan Approval
If you have actually decided to take out a personal loan for consolidating your debts, you must try your best to boost your chances of loan request acceptance. Once you are equipped with the perfect knowledge of things to avoid and ways to rectify shortcomings, you are all set to get a fast sanction. Here are some useful tips for you to consider.
Determine the Loan Type You Want to Opt for
In this context, you must know that there are two kinds of personal loans. They are secured and unsecured personal loans. Secure loan necessitates collateral like your car or home that can actually be possessed if you start defaulting, by the bank or any other lender. These loans come up with less stringent credit requirements. Moreover, you have greater borrowing power and lower interest rates. But do not forget that your own property would be at a risk.
Unsecured loans, on the other hand, necessitate no collateral or security of any kind. However, they would be reliant on your ability to pay back the loan and your creditworthiness. You would require having a better credit score for getting loan approval and you have to pay a higher rate of interest as compared to a secured loan.
Determine the Amount Accurately
Before putting in a personal loan request, you must do all your calculations meticulously. Do your Math carefully. Tally up all your existing debts which you want to consolidate and accordingly determine a realistic amount. Avoid requesting for an unrealistically high amount.
Keep Track of Your Credit Score
You must examine your credit score and credit report on a regular basis. You could scrutinize your credit report once a year from three credit bureaus at AnnualCreditReport.com for free. You need to assess your credit report meticulously and look for inaccurate or negative information which could be adversely impacting your chances of loan approval. If you are able to identify any errors do not allow them to ruin your credit profile instead, dispute them and get them eliminated from your updated credit report.
Always keep track of your credit score. Before putting in your loan request, try to boost your credit score. If you are having a poor credit score, it is a wise move to wait for a while until you get a decent credit score to make you eligible for a personal loan. Examine your credit score every month for free at Credit.com.
Choose the Right Lender
Shop around and compare the offers. Then make an informed decision and choose the best lender in terms of interest rate, loan term, and the bank or institution that would most probably sanction your loan. Do not accept the first offer blindfolded. You must read carefully the fine print. You must meticulously scrutinize the loan agreement, particularly the loan terms & conditions.
Remember debt consolidation is the right option only in certain scenarios. Depending on the loan term and the interest rates, you could eventually, pay more for your personal loan even though the monthly payments seem to be lower. You must clearly understand the full expenses of your personal loan as compared to your total cost of all existing debts.