Sometimes in life a loan would be a really, really handy thing to get.
Ideally, we would all live within our means but this isn’t always possible. When you need some extra cash quickly a loan can often be the most sensible way to go about getting it. Taking out a loan can make a huge difference to your finances and your lifestyle.
For instance, you might need to buy a car to be able to start a new job or you might want the money to start up a new business. Whatever you want it for, you will feel pretty disappointed if your loan application gets turned down. It’s not yet time to give up, though. There are still some things you can do to try and get the money you need.
Don’t Take It Personally
The first thing to remember is that this isn’t a personal thing that the loan company has against you. Loan applications are accepted or rejected every day on the basis of standard criteria – unfortunately on this day you’ve simply failed to meet the criteria of your chosen lender.
Even though getting declined for a loan can be a tough pill to swallow, it’s not the end of the world. What matters now is that you are able to pick yourself up and work out what you need to do next in order to improve your chances of approval. The following points should help get you on the righttrack in this respect.
Ask Why the Application was Rejected
Before going any further, you need to establish what it was that caused the application to be turned down. There are many different reasons a lender may reject your application; it could be due to your credit history, residency status, age, income level or employment status. Whatever the reason, most lenders will be happy to disclose this if you ask the question.
For example, you may have been turned down due to your credit history; you now know that before applying again you need to work on improving your score. Settling any debts you have will significantly improve your score, however even simple things like registering on the electoral roll or cancelling dormant credit cards could be enough to swing the balance in your favour.
Despite this, improving your credit score takes time if you need cash quick then it may be looking down some other routes.
Ask for a Smaller Amount
Often, lenders will run affordability checks to ensure that you can comfortably afford the scheduled repayments alongside all of your current credit commitments. If they feel you’ll be unable to afford the repayments of the initial loan application, then they may offer you a smaller amount. If they don’t offer it then it may still be worth asking, providing the smaller amount will still be of use to you.
Try a Different Lender
Not all lenders use the same criteria and you could discover that you have a far better chance of approval with a different lender. There are now a number of specialist bad credit lenders that are designed to help those who have previously been declined; they do however have high rates of interest so they will cost you much more in the long term.
Equally, you might be tempted to borrow the money on a credit card but this can also work out to be a lot more expensive. The flexible repayment terms can also promote bad financial habits.
Please note, applying for multiple loans with different lenders can affect your credit score, so be sure to tread carefully when making further applications.
Ask Someone to Guarantee your Loan Application
Often when you’re looking to move into rented accommodation for the first time and you haven’t yet established a good credit score) agencies will request that you provide a guarantor; the guarantor then accepts the responsibility of paying your rent if you fail to do so. What you may not know is that there is now a loan that uses exactly the same principle.
These are known as guarantor loans and can be ideal for allowing parents or other relatives to support a younger member of the family without having to lend them the money directly. The interest rates are also considerably lower than many other bad credit loan lenders.
If you are going to take out this kind of loan then it is essential that you approach it responsibly and realise that your guarantor is giving you a big helping hand. Despite having their security, it should always be goal to make every payment on time and in fill, not least to ingrain good financial habits and prepare yourself for the future.
Join the free Master Your Money course!
Join the free email course and finally learn how to manage your money better, pay off debt, save more money, and reach financial freedom.