Why Can’t I Get a Loan?

Having your loan application rejected can be a serious blow. Understanding the reasons for decline can help you qualify the next time.

Generally, lenders are required to explain why an application was rejected. However, this might not be the whole story you need. The main reasons are:

  1. An error in the credit report; errors include closed accounts showing up as open. Or it could be inaccuracies involving late payment. If you see an error, dispute this with the major credit reporting agencies.
  2. You have a bad credit score; this is one of the main reasons why you can’t get a loan. You need to be making timely payments to improve this. You may try applying for credit cards. Secured cards build your credit.
  3. You have too much debt; this is why you can’t get a home loan. Lenders look at your debt to income ratio. Having numerous debts raises a red flag. Read our guide about debt management.

Why Can’t I Get a Home Loan?

Each prospective homebuyer’s loan file is unique. But there are some issues which may be to blame for being rejected. The most common hurdle is your credit score. Lenders will first scrutinize the loan type, your background and other factors.

Your spouse’s credit also affects your chances of being approved. You might have an impressive credit score, yet if your spouse is lagging behind it would be hard to obtain a loan.  Other factors which determine your prospects of getting a home loan include:

  • Debt to income ratio
  • Steady and reliable income and employment
  • Cash on hand

Why Can’t I Get a Student Loan?

Getting financing during your education years can be tricky. Lenders are all about risk. They want to be confident you can pay back. They want an established track record with borrowing and a high credit rating. Many lenders require you to have a minimum credit score of 660-680.

All these qualifications make it hard to get financing as a student. However, having a high credit score is the simplest way to get approved. If your parents have a good credit score, take advantage of this. Ask them to add you as an authorized user on their credit cards.

You can lower your monthly installments by refinancing your student loans. This can help you free up cash flow. It is also a good way of keeping the budget under control. Refinancing also helps save money on interest.

Minor Issues That Can Affect Your Loan Application

  • You forget to include work history or source of income
  • You earn less income
  • You have a record of late loan repayment

Review your loan paperwork carefully. You may sabotage your application just through simple avoidable mistakes. Including multiple job history or a complete no work history makes you look less dependable.

Having a consistent job makes you a more attractive prospect. Working while keeping your grades high makes you look more credit worthy.

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