Why Lenders Reject Your Application
Even in the realm of loans for people with bad credit, getting a loan approved is not as easy as it seems. There are many aspects that lenders look into and consider whether to give you a loan or not. Here are some of the most common reasons for rejection.
Say what? You might ask, why would you be denied of a bad credit loan because of your poor credit score? The truth is that while loans for people with bad credit are offered, obviously, to provide financial relieve for people with poor credit rating, it does not really mean that anyone with bad credit are qualified to get such loans.
Lenders would ask you about the cause of your poor credit. If your credit score is caused by a life circumstance that is out of your control, lenders may be willing to work with you. Life circumstances such as child support issues, divorce or medical emergency could shake your finances, causing late payments or default. Lenders may be willing to work with you most especially if you’ve already started fixing whatever temporary life circumstance that may have affected your finances.
However, if your bad credit is caused by a chronic history of late payments or default because of negligence or bad financial management, lenders would see you as somebody who would likely default on your payments again.
You Ask for More Than You Can Afford
You were able to provide all the requirements but your application still got rejected? You might be asking for more than you can afford! The amount you can borrow varies per lender and the type of bad credit loan you are getting.
Lenders of payday loans for people with bad credit, for instance, don’t just look at your salary, they also check your outstanding debts from other lenders. For this type of loan, most lenders only approve 30-50% of your monthly income. Therefore, if you are making $3000 per month, the most you can borrow is $1500. Lenders, however, also consider your monthly payments for other loans which they would discount from the maximum amount you can borrow from them. Asking for too much may result in loan rejection.
There are many types of loans for people with bad credit and some of them, such as payday loans, require borrowers to have a source of income to qualify. However, there are also bad credit loans that don’t require an income, such as title loans. So make sure you are applying for a loan that you are qualified to get.
Inconsistencies in Your Application Form
Be as honest as possible in filling out your lender’s application form. After all, lenders have a way to verify your information and any errors in it may easily result in loan rejection.
The bottom line is: be more well-informed not only of the requirements for getting a loan for people with bad credit but also of how lenders determine your “creditworthiness” even as a bad credit borrower.