Loan Rejections
Loan Rejections
There is a time in our lives we all need to or want to apply for a loan but the process can be hard and tedious process and usually requires a lot of time and perseverance. What is frustrating is when that time and effort goes unrewarded and our loan is rejected. If we understand the process for a loan and the reasons why our loan might be rejected before we apply, it can help us fix any issues we have and ensure the loan process runs as smoothly as possible. Remember that every time we apply for credit and get rejected this appears on our credit rating and can help affect our score.
The banks and financial institutions state four main reasons your new loan applications might get rejected:
Your Credit Rating
Unpaid bills, too much debt are some common reasons why your mortgage application might be declined. Problems also include issues such as excess activity on your credit check (looking around for banks or financial institutions for finance).
Minimal or Nil Savings
Financial Institutions want to reduce their risk. This means that if you can’t pay the mortgage they want to be able to sell your property and more than cover the price of the loan. When a borrower has less than 20% deposit the banks will ask you to pay for ‘lenders mortgage insurance’, so in effect a fee for not having a big enough deposit. They also look at your deposit as too small a deposit can be an issue, especially if other areas of your credit look risky.
Loan Serviceability
When it comes to loan serviceability a couple of things appear very important to lenders:
Income: Your income needs to be sufficient to service the loan and still afford your cost of living.
Job Security: Lenders like to see you have a stable income before they will lend you money.
This means that if you’re in your probationary period or you work on a part time or casual basis then your chances of obtaining a loan are greatly reduced, so the longer you remain with a company the better your chances are.
Overcommitted/Too much Debt
If you feel overwhelmed by the debt that you have, look for refinancing that will help you settle your debts quickly and affordably. If you have too much debt and you look to be struggling, the lender most likely will deem you too risky to lend to.
No Savings Record.
If you can demonstrate a track record of savings and show the bank you are able to put money aside it gives them confidence in your ability to pay off a mortgage. If the reason you can’t save money is because you are busy trying to pay debt down (credit card and personal loans), look for refinancing companies as they may have a solution that will help you settle your debts quickly and affordably.
If you’re struggling with any kind of debt you are not the only one, seek professional help. Before applying for any type loan it’s important that you speak to a debt professional as to understand your ability to pay off the loan in the future.
Remember when applying for a loan they will asking you to have your building inspection report and pest control report available, so be prepared.