Applying for a loan can be an exciting or daunting time depending on your financial situation. Then, when the rejection comes, it can leave you feeling very disheartened at times. So, how do you know what to do when your loan is rejected? Luckily, this article will help you figure that out!
Before you begin applying for another loan, you need to find out why the previous one was rejected. This way, you will be able to know exactly what you need to change. This will, in turn, ensure that your next application is more successful.
Why has your loan been rejected?
When it comes to what to do when your loan is rejected, you must first understand why it was rejected. Knowing why it was rejected will further help you to get your next one approved. Lenders have a standard which means that they must lend responsibly.
If they think that you won’t be able to make your repayments, they likely won’t lend to you. They will also have to make you aware if it gets rejected because of your credit score. Your loan application may be rejected for reasons such as:
- You do not have enough income or savings to show that you can pay off the loan
- There are defaults listed on your credit report
- After your income, expenses, and debts have been considered, the lender thinks you may struggle to make the repayments
- You have repayments that are 14 days overdue
How to improve in time for your next loan application
When you apply for multiple loans over a short time, it can look very bad on your credit report. In fact, it is something that can turn your lender away very quickly. That is why it matters that you know what to do when your loan is rejected. Follow these easy steps to ensure that your next application is improved.
Check out your credit report
Make sure that your credit report doesn’t have any errors and that all debts are yours. If there are mistakes, get the credit reporter to fix any wrong listings so that your credit score isn’t lowered. This will help you with what to do when your loan is rejected.
Pay off your debts
Realistically, you shouldn’t just be keeping up with your loan repayments. You should also be making extra repayments when possible. You will be able to pay off your debts faster and save on interest this way.
Credit providers will always look at your income, expenses, and savings. They will do this to see whether or not you can keep up with your loan repayments. You should always start a budget by using the free online Just Budget planner to acknowledge your spending. You will then be able to identify where there is room to save.
If you grow your savings, it will be far easier to take out a loan as well as keep up with the repayments.
Other options for what to do when your loan is rejected
If you are absolutely desperate, there are plenty more ways to get help. For help, you may be able to:
- Apply for a low-interest loan- Are you on a low income and needing money for essentials? You can always try to apply for a no or low-interest loan.
- Advanced Centrelink payment- Do you receive Centrelink payments? You may be able to get an advanced payment. This should be able to help you to cover any unexpected costs in the short term.
- Get urgent financial help- If you find yourself in a crisis, never be afraid to ask for help. You may be able to get urgent money help by applying for a personal loan, even if you have bad credit.
Long-term strategies to help with loans
Sometimes, if you have been denied a loan, this can only be fixed with long-term strategies. Most of the time, it is a simple fix. However, long-term strategies may need to be implemented, so just be aware of that. Here are some great long-term strategies to help with gaining loan approval.
- Build your credit- If you build a strong credit history, future borrowing will be far easier. That means you will need to borrow and repay loans on time. Over time, your credit will improve, and you will likely get better interest rates. Not only this, but you will also get fewer rejections in the future. If you already have bad credit then you can also get it wiped clean by a credit repair company. We recommend Clean Credit for this. They are one of the most established and longest serving credit repair companies with over 80 five-star reviews on Trustpilot. Best of all, Clean Credit could repair your bad credit within as little as 30 days!
- Increase your income- While earning more is easier said than done, it is worth a shot. When you need to borrow money, your income matters. Overall, it is always good to earn as much as possible if you’re needing a loan.
The bottom line
Hopefully, in this article, you’ve learnt what to do when your loan is rejected. For more help, you can always contact Just Budget. We have a team full of highly skilled professionals ready to help you.