• Skip to main content
  • Skip to secondary menu
  • Skip to primary sidebar
  • Skip to footer
  • HOME
  • RECOMMENDED BOOKS
  • FREE TOOLS
  • CONTACT US
  • ABOUT

The Fortunate Investor

Investing, Business & Personal Finance For Wealth Builders

  • Save Money
  • Invest Your Money
  • Get Out of Debt
  • Making Money Online
  • Family & Money
  • Taxes
  • Business
  • Retirement
    • Retirement Calculator
Home » Was Your Loan Denied? Find out What to Do Now

Was Your Loan Denied? Find out What to Do Now

August 5, 2019 By The Fortunate Investor | This article may contain affiliate links. For more information visit our Disclosure

Tweet
Share
Pin
Share
Share

Was Your Loan Denied? Find out What to Do NowThere’s always some light at the end of any tunnel. It can feel devastating to have your hopes dashed at a time of financial need. But, when a door slams shut, a window will open.

Don’t let the knocks get you down. Learning the positive steps you can take to find the financial solution you need is all part of the process. If you’ve had a loan denied, it’s time to pick yourself up, dust yourself off, and move on. Here’s how.

Reasons Why You’ve Had a Loan Denied

Take a deep breath and sit down to objectively analyze what went wrong with your loan application. If you’ve been denied for payday loan or another type of credit, the lender may be happy to explain the reasons. The first thing to do is ask them.

The two usual culprits are credit and income.

Bad Credit

When you apply for a loan, lenders will want to see how you have borrowed in the past. This is normally done through credit scores.

Lending to anyone carries with it an element of risk. Lenders need to be clear about the level of risk they’ll be taking by lending to you.

Many lenders will want to see evidence that any money you have borrowed in the past has been paid back and on time. It’s possible you may have only ever borrowed small amounts but defaulted on a payment. That’s a red light to a lender.

If credit was the cause of the loan being rejected, the lender is obliged to tell you that your credit history was used against you. They should tell you the reason why. This could be defaulted loans or too many credit inquiries or applications.

They should also let you know how you can see your credit reports, often free of charge. The good news? You can improve your credit.

Insufficient Income

Again, things come back to risk. The money you borrow is not ‘free’ money. It belongs to the lender, and they will want to be satisfied that you have sufficient means to make the minimum monthly payments.

With some loans, it’s a legal requirement for lenders to calculate your ability to repay.

Many lenders use a debt to income ratio to work out if you’ll be able to handle the payments required by the loan. It’s a bit like using an algorithm.

They’ll look at your income and outgoings and decide if you have enough coming in to live off and repay your debts. If they don’t like the figures then it’s likely they’ll reject your application.

Analyze Your Own Finances

Check Credit reportBefore applying for your next loan, take a good hard look at your own financial situation. Imagine that you are the lender.

Consumers are entitled to a free credit report every year under federal law. Take advantage of this to ensure your score is as good as possible. Mistakes do happen, so check your credit report. You have the right to have errors removed.

There’s nothing stopping you from asking lenders if they anticipate any issues. They can explain to you in detail what matters and what doesn’t. If you’ve experienced a foreclosure, they can tell you how long you may have to wait to borrow again.

Next, work out if you really have enough income to repay the loan. Ask the lender what they would require to see with regard to your debt to income ratio.

A Plan for the Future

Other loans you already have could be part of the problem. If there’s a way you can reduce these, it can make you look better as a borrower.  A larger down payment when borrowing for a home or car may also help you get approved.

There are clear advantages here. Crucially, you will borrow less. That means your monthly payments will be lower. Ultimately you’ll pay less interest too.

Lenders see less risk if there’s a lower loan to value ratio. That means they may be willing to approve a loan even if your credit isn’t perfect.

Major Assets and Cosigning

If you have any major assets, you may be able to use these to borrow against. There are risks, though. You could lose your home or vehicle if you fail to make the required payments.

If your income and credit were to blame for a loan rejection, is there someone else who could help? A friend or family member could add their income and credit history to yours. This is known as cosigning.

The cosigner would apply with you. They would then also be responsible for repaying the loan. Clearly, there are emotional risks here. Only use a cosigner who is willing and able to understand the risks involved.

Further Applications

Use the information you’ve received from the lender who rejected your loan wisely. That information has value. It’s allowed you to assess your credit and income.  A different lender just might approve your loan.

Consider another application. Do your research well. Check local banks or credit unions, and look into online-only lenders.

Changes for the Future

Changes for the FutureBorrowing is much easier if you build up a strong credit history. Always borrow and repay loans on time. If you do this, your credit will improve over time. You’re also more likely to get better interest rates.

If you’ve fallen behind on any loans, get your house in order. Make an affordable repayment plan that’s realistic. Talk to your lenders. It might be worth consolidating several loans into a single one.

Paying off debt is going to increase the amount of monthly income available for new loans. If you have opportunities to earn more then take them. Use the extra cash to pay down any loans.

Always Look Forward

There is not much you can do about the past. If you’ve had a loan denied, the best advice is to move on. There will always be positive changes you can make to your credit score and to the way you use your income.

Continue reading related articles on our site for more helpful financial tips.

  • About
  • Latest Posts
The Fortunate Investor
The Fortunate Investor at FortunateInvestor.com
The Fortunate Investor is the finance half of the husband and wife duo behind this website. Michael's finance and investment advice is rooted in an MBA and 20 years experience as an entrepreneur, banker, and manager in the financial services industry.
Latest posts by The Fortunate Investor (see all)
  • 5 Red Flags to Avoid in a Personal Injury Attorney - April 12, 2021
  • Business 101: Streamlining For Success - March 31, 2021
  • Easy HR Tips For A Small Business - March 28, 2021

Primary Sidebar

Popular Articles

From Browsing To Buying- How To Find The Perfect Real Estate Investment

From Browsing To Buying- How To Find The Perfect Real Estate Investment

Real estate is a popular investment option. While it could be deemed a safe bet in comparison to … Read More about From Browsing To Buying- How To Find The Perfect Real Estate Investment

5 Red Flags to Avoid in a Personal Injury Attorney

5 Red Flags to Avoid in a Personal Injury Attorney

In the US alone, a personal injury attorney could work on one of more than 39 million accidental or … Read More about 5 Red Flags to Avoid in a Personal Injury Attorney

Investing Basics for Beginners

How To Maximize Your Money In Real Estate Investing

Whether your short or long-term plan is to have children, build your own home, buy and sell … Read More about How To Maximize Your Money In Real Estate Investing

Is Your Company Website Missing These 5 Ingredients

Is Your Company Website Missing These 5 Ingredients?

A lot of important ingredients are required when building a successful company website. Below are … Read More about Is Your Company Website Missing These 5 Ingredients?

How Landlords Can Increase Value For Their Tenants

How Landlords Can Increase Value For Their Tenants

Many people seem to think that working as a landlord is an easy job, and while there certainly is a … Read More about How Landlords Can Increase Value For Their Tenants

Footer

TOPICS

SAVE MONEY
INVEST MONEY
REDUCE DEBT
MAKE MONEY
FAMILY & MONEY
TAXES
START A BUSINESS
RETIREMENT

THE FORTUNATE INVESTOR

ABOUT US
ADVERTISE
CONTACT US

The Fortunate Investor focuses on personal finance topics to build wealth. Topics include saving money, investing, managing debt, family and money, taxes, making money, college planning, starting a business, coupons and retirement.

SOCIAL MEDIA

FACEBOOK
TWITTER
PINTEREST
INSTAGRAM
YOUTUBE

Copyright © 2021 Fortunate Investor. All Rights Reserved. | Disclaimer & Disclosure | Privacy Policy | Terms of Service