A loan application can be a quite stressful and time-consuming task. It can then be quite disheartening if your loan application gets declined. However, if you do find yourself with a declined loan, it is important to understand what has disqualified you from the loan.
There are various reasons why your loan may have been declined. There are lots of organizations out there like CreditNinja.com, who can help you with your loan application. This is helpful if you are having real difficulty finding the cause of the issue.
In this article, we will discuss what can disqualify you from getting a loan.
What Happens When A Loan Is Declined?
Even though in this article we will be discussing reasons that could disqualify you from getting a loan. It is also critical to note that if you have submitted and been declined a loan application, usually the lenders will often tell you the reasons they declined your application.
Within 30 days you should receive a reason why your loan application was denied. If you are still unclear then you can phone them up to discuss it in more detail.
Reasons That Disqualify You From A Loan
When you are thinking about submitting a loan application you need to ensure that you meet all the criteria. Here we will talk about all the factors that could disqualify you from getting a loan.
Low Credit Score
Your credit score is frequently taken into account by lenders when reviewing your loan application, along with other elements like your income. Lenders may determine from your credit score how competent you could be at handling money.
Your credit score primarily considers elements including your payment history and total debt.
If your income is below a lender’s minimum, you can have trouble acquiring one of their loans. Lenders may charge you higher interest rates even if you qualify for a loan despite having a low credit score. This is to account for the possibility that you won’t be capable of repaying the loan.
Asking For Too Much
A lender might turn down your loan application if you request more money than you can pay back. This is because the loan amount you are approved for is determined by your income and other debts.
The lender may determine that you are ineligible to borrow a specific amount after analyzing your financial situation. The lender will almost probably turn down your request if it is unrealistic.
If important details or supporting documentation are missing from your application, the lender can immediately reject it.
Before submitting your application, check it over carefully, and provide any supporting files that the lender requests. To make sure the lender has everything it needs to execute your application, you might also give them a call.
In addition to this, you need to ensure that you are meeting the basic criteria as well. This includes being at least 18 years old, and a US citizen. Also, you need to have a stable income and bank account.
Income To Debt Ratio Is Too High
Your income-to-debt ratio evaluates your total monthly debt to your gross monthly income. A high ratio like this could indicate to banks that you might find it difficult to pay back your debt.
Due to this, it is recommended that you strive for a ratio of around 35% or below, which is generally seen as favorable. You’d have a better chance of getting the loan approved that way.
Lenders look at your income to assess whether you can afford to repay the loan. In essence, they want to be certain that you can pay the payments every month and won’t let them down by not making them.
The lender may refuse your loan application if they believe that your income is too low for the amount of money you are asking to borrow. This happens more if your income fluctuates from month to month.
Not Meeting The Lenders Rules
The purpose of your loan is really important. As a result, if you are applying for a certain loan that doesn’t fit in with the criteria of the lender then you can be disqualified for the loan.
For example, you can ask for a personal loan. These loans are quite flexible and can be used for most things. However, there are particular rules you need to follow. With personal loans, they don’t like you to use them for college tuition. Also, a lender may not allow you to invest the money as well.
Therefore, you need to understand the lender’s rules and determine if your intention behind the loan meets them.
At some point in everyone’s life, they will attempt to get some form of a loan. However, with a loan application, there are a few factors that can disqualify you from a loan. This can include if you are asking for too much or not meeting the lender’s requirements.
We hope this article has been helpful and given you a better insight into what disqualifies you from getting a loan.