Sometimes, you just need to apply for a personal loan to help you with your financial situation. However, lenders won’t always approve your loan application, and it can be disheartening when your loan gets rejected.
It’s important to determine why your loan application was rejected so you’ll know how to proceed moving forward. Here are some of the common reasons lenders would reject a personal loan.
Low or Irregular Income
Lenders will look at your ability to repay the loan before approving it. And if you have low or irregular income, lenders might believe that you won’t be able to meet your payment deadlines.
To improve your chances of getting loan approval in the future, you can look for a secondary source of income. And if the reason behind your irregular income is a recent change in jobs, you can wait it out for a few months so that your income history will look better.
Low Credit Score
Based on your credit score, a lender can tell how likely you’ll be able to pay your debts in time. So, if your credit score is low, chances are the lender will reject your application.
There are a few things that can affect your credit score. Missing your payment deadlines is one reason behind a bad credit score. To improve your credit score, you must practice good financial habits and make on-time payments. You can set up automated scheduled payments or several reminders to never forget to meet your payment deadlines.
Inconsistencies in Your Application
Sometimes, the reason behind your loan rejection could be as simple as inconsistencies in your application. The information in your application must match those in the financial records the lenders will check.
If this is the case, you can request a copy of your credit report and check for any mistakes. If you’ve found any, you can dispute these inaccuracies so that an investigation can be conducted.
You can also ask your creditors to remove any negative information from your credit report. For example, if you’d only made a single late payment, you can ask your creditor if they can remove it by writing a goodwill letter addressed to them.
Too Much Debt
Lenders won’t approve your personal loan application if you already have a lot of debt. Too much debt can indicate that you won’t be able to pay back the loan and are borrowing more than you earn.
For this case, it’s best to focus on repaying some of the debt you already have. This can also help improve your credit score.
Recent Credit Applications
If you’ve recently applied for a lot of new credit, lenders will see this as a red flag. They might believe that you are unrealistic when it comes to paying off your debts. With a lot of credit to pay off, you might not be able to meet all your debt payments. So, it’s best to handle one credit at a time.
Lenders will look at one’s ability to pay back the loan before they decide to approve or reject your application. So, if you have a low credit score or low or irregular income, lenders might assume you won’t be able to repay the loan. Being in too much debt and having tons of recent credit applications could also be viewed as red flags by lenders. However, in some cases, your loan application could have been rejected due to inconsistencies in the application, which you can dispute.
If you’re looking to apply for personal loans in Memphis, TN, Magnolia Finance Co. can make the borrowing process quick and simple for you. At Magnolia Finance, we understand the time-sensitive need for help when short on funds. We strive to make same-day loans with clear, straightforward repayment plans. Apply for a loan now!