Loan Application Refusal Reasons

By: J Tillotson

Loans can be refused for a variety of reasons, some of which are obvious: Illegibility, omitting important details, or just not filling in the application fully. But some reasons aren't as obvious, and people often don't realise they're putting their credit score in jeopardy by repeatedly making the same mistakes.

For example: if you consistently list your loan purpose as 'to pay off gambling debts', while honest, it doesn't make you look as good as simply stating 'debt consolidation'. If you get application after application refused because of this, every time a new search is made and refused, it looks worse on your credit file. Thus, a vicious circle is formed.

If you get just one application refused, investigate further into the reasons for refusal, before applying for any more loans. Make sure you're not making any of the following mistakes.

Loan Amount - Applying for a larger sum of money than you need can go against you. While a lender can't possibly know the exact amount you require, they can form a pretty accurate assumption based on your current circumstances and past history. They can also use your financial details to guess at the amount you can reasonably pay back, so trying to borrow above this will cause alarm bells to ring.

Unsigned Application - This should go without saying, but there are a surprising number of people who forget to sign, and date, their applications. Without a signature and date, the lender cannot carry out a credit check. This leads to loans being refused immediately.

Lack of Evidence - Failure to provide current bank statements, wage slips or other financial information when asked for can seriously impede your ability to get loans. At best it shows a lack of organisation, at worst it shows you may have something to hide.

Joint applications - It's generally assumed that a joint application will have more chance of approval than a single one. This isn't always the case however, especially if the second applicant has a less than perfect credit history. If you must have a co-signer, make it someone with whom you share financial obligation such as a partner.

Financial knowledge - Few things are more off-putting to a lender than an applicant who doesn't know about their own finances. If your personal finances are handled by an accountant, make them available for the lender to talk to, but make sure you have knowledge of your financial affairs too.

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