17 Aug 2020
So, you've just been rejected for a loan – but you still need emergency funds. What are you next steps, and is there any way to have the loan approved by a different lender?
If you find your loan application rejected, you might be wondering if you could have done something different in order to have the loan approved. Here's what to do if you can't get a loan, with some hints and tips on how to get your loan approved the next time around.
It's never a good idea to apply for loans back to back. Knowing why your first loan was rejected can be the key to getting the next loan approved with minimal impact on your credit score.
If your loan application is rejected, you may feel that it's a personal attack on you – that a lender does not like you or trust you. The truth is that many lenders use an array of criteria to judge whether or not you are a suitable borrower and able to pay back your loan without putting yourself in further financial hardship.
Personal loan rejection reasons include the following:
Your credit history is an indicator of how responsible you have been with money in the past. And while many lenders understand that your past behaviours may not necessarily impact the present, a low or no credit history can still cause your loan to be rejected.
If your loan is rejected for this reason, it's worth looking into raising your credit score by paying bills and current debts on time. If you have no credit history, you can open a credit card account – but be sure to use it responsibly!
A responsible lender will not allow you to take out a loan if you are not earning enough money to repay the loan without putting yourself in further debt. In some cases, you can use government benefits to repay loans, but some lenders will require you to still be making a little money on the side, usually from a casual job.
A large amount of debt is one of the top reasons for a loan rejection. It indicates that you already have too much money owing and that allowing you to borrow more will possibly send you down a path to bankruptcy. A large amount of debt is never a good thing to have, so it may be worth looking into debt consolidation to help pay your debts off.
Incorrect or outdated personal information can be enough to cause your loan to be rejected. The best way to avoid this is to check with a credit reporting agency, such as Equifax, Illion or Experian, to ensure that all information on your credit report is accurate.
If you've been unable to secure a loan due to personal loan rejection reasons, there are a few things you can do to increase the likelihood of your next loan being approved.
A credit report is a record of a person's repayment of debts. Your credit report will keep tabs on your credit history from several sources including banks, credit card companies, collection agencies, and governments.
By knowing your credit score, you'll have a better idea of whether or not a lender will allow you to borrow money – a high credit score almost guarantees it, while a low score means you may have to look into ways to raise your score to ensure your next loan request is approved.
You can get your credit score from a number of agencies in Australia, including:
A collateral asset can help to fast-track loan approval. This means you can offer up collateral, such as your car, that the lender can repossess if you fail to repay the loan. This gives the lender a form of security and will greatly boost the likelihood that they approve a loan.
A guarantor is someone who will step in to repay your loan if you fail to do so. You'll need to find someone you can trust (and who trusts you back), as this can be a very big ask for many.
Debt consolidation is a great way to get your debts under control and raise your chances of being able to borrow money again in the future. It involves rolling all your current repayments into a single recurring payment, making it easier for you to track and pay off your debt.
If you're in a position to ask for a raise at work or move into a new role with a different employer that pays more, it could be a good way to increase your income. Taking on a second casual or part-time job can also be advantageous. Uber, Fiverr, Airtasker, freelancing positions, and other odd jobs can really help to increase your income.
Creating a budget is hugely beneficial in a number of ways. For starters, it will help you to understand where all your money is going and how much you need to set aside for paying off existing debts. It can also set the groundwork for good money-saving behaviour, especially if you factor in savings and an emergency fund into your budget. Moneysmart has an online budget calculator that can help you get started.
Do you think you're destined to be knocked back for a personal loan? Think again! Sunshine Loans will give you a chance where other lenders won't. If you feel a small loan of up to $2,000 is for you, contact us or apply online today.