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How to deal with Personal Loan Rejections

Personal Loans > Personal Loan Articles > Article: How to deal with Personal Loan Rejections

Credit is something we all will request at some time in their lives, whether it's a credit card, mortgage loan, car loan or a personal loan. As much as we'd all like to get every piece of credit we apply for, banking and financial institutions just don't work that way. They're in the business to make money and approving loans to people that are a credit risk may necessarily be a good option for them therefore, they're likely to deny a personal loan request from any customer that represents a risk. If you're the customer that's being denied the personal loan request, you may have a hard time dealing with the rejection. There are ways to deal with personal loan rejections and things you can do about the rejection.

When a lender denies an application for any loan type, but specifically a personal loan, there may be many different reasons. Some of the most common reasons for denial are previous bankruptcy, judgments, and collection agency reports on credit report or current unemployment. When you apply for a personal loan, the first thing the lender is going to do is get a report on your credit to determine your financial status and credit history. Your credit report says a lot about your credit worthiness and ability to pay.

Other Factors

Other factors that may prompt a personal loan rejection are late payments, exceeding your credit limits and having overdue accounts. If a lot of inquiries (loan applications) show up on your credit report, this can be thought of negatively as well. This will also affect your credit score. Lenders tend to think of many inquiries as evidence that you either have applied for a lot of credit recently that isn't showing up on your credit report or that you have more credit than what is showing up.

Sometimes, lenders will still lend money to borrowers with poor credit history if they believe the borrower is currently paying off old debts or if the reasons for the past due accounts no longer exist. The only difference will be that the lender may charge you a higher interest rate because of the negative credit history. If you feel the interest is not something you're comfortable, reconsider getting the loan. Your reason for wanting the loan may not be worth what you'll end up paying with the total interest for the term of the loan.

If you have employment with a reputable company and have held this job for quite awhile, that's in your favor. If you have assets and savings, lenders are usually quite willing to give you a loan, secured or unsecured. The individuals most likely to be denied a loan are those with low income, little savings and are consistently late on payments. What should concern you is if none of things apply to you and you were still denied a personal loan.

Ask Questions to Find Out Why

If you've been denied a personal loan and don't understand why, speak to the lender that denied you. If you consider yourself a good credit risk, then their reason for rejecting your personal loan request was most likely from something that was on your credit report. They may not always be willing to go over every detail of your credit history with you, but they can tell you where you can get a copy. Every consumer is entitled to a free credit report, especially if they've been denied credit in the last 60 days. Take advantage of this and get a copy of your credit report to see what's on there that may be responsible for your personal loan rejection.

Fix Errors on Your Credit Report

Although your credit report is often looked on as the "gospel", many people have found errors on their credit report. Certain errors can harm your credit for a long time if they are not corrected. Go over your credit report starting with the top where they list your name and ID numbers. Be sure that the individual mentioned on the report is in fact you.

Another situation that often shows up negatively on your credit report is some past account that has been paid but is still listing as an open account. Businesses should report to the credit bureau as soon as an account is paid in full, but they don't always do this, especially collection agencies. While lenders usually report on a monthly basis, not all companies do this.

If you see something on your credit report that is incorrect, contact the credit bureau and inform them of the error. They'll provide you with a form to fill out regarding the error as well as a means for you to prove it's an error. You can also contact the lender or agency and ask them to send you a letter of satisfaction that you can give to the lender that refused your loan application and also send a copy to the credit bureau.

If there are any mistakes on your credit report such as late payments that you know were not late or unpaid accounts that are paid, contact the lender and request that they make the correction with the credit bureau. Once you've taken care of this, don't forget about it but follow up with the report. They may tell you they'll take care of it but may forget. You don't want the same errors to come back and haunt you months from now. As it is, it often takes months for corrections to show up on your credit report.

If your credit report has been corrected and you're still rejected for a personal loan due to debts and poor payment history, take some time to rebuild your credit by making your payments on time. It takes awhile for your credit rating to get better but with consistency in payments and not taking on any more credit, you'll be able to put yourself in a better position to apply for credit in the future. Do not make the mistake of trying to take on more credit to "rebuild your credit" if you're already having trouble making your payments.

What to do next

Finance Comparison lists a number of highly competitive personal loans that you can apply for online. Simply compare rates, terms and apply online. Alternatively try visiting badcreditpersonalloans.com.au, which is an information repository for people with bad credit.

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