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Getting denied funding when you need it in an emergency is stressful, but it’s not uncommon. About three-quarters of people who apply for personal loans in the US have been rejected.
Why are so many people getting rejected? The reasons could be simpler than you think. From minor errors in your contact details to borrowing with the wrong lender, you could be jeopardizing your application without realizing it.
Are you making any of these mistakes? Repairing them before your borrow another loan online might help you secure funds faster.
Mistake #1: Not Checking Your Credit First
Why does your credit score matter? It’s only one of the biggest factors most lenders check when determining your creditworthiness, or the chances you’ll repay what you owe.
Each lender sets its own benchmark for these scores. If you fall below it, you may get a smaller loan amount than you requested. There’s also a big chance they will reject you outright if your score is low enough.
Not all online lenders require prime credit from their borrowers. While they’ll still check your score, these online direct lenders may also look at your pay schedule, income, and employment history to make up their minds.
Knowing your score can help you find the right online direct lenders that cater to your kind of profile. If a check reveals you have excellent credit, you’ll have better luck being approved for pretty much any basic personal loan. However, if you have subprime credit, you may want to stick to installment loans for bad credit.
Mistake #2: You Don’t Have an Income
Your income is another creditworthiness factor that most lenders will look at before approving (or rejecting) a loan online. While your credit score reveals how you’ve handled past loans and line of credit personal loans, your income shows how much money you’re earning today.
Again, how lenders review your income may differ. While some prefer to see a traditional salary, others may accept freelance work or income from property, alimony, or dividends.
What’s important is that you’re bringing in enough money to cover the cost of your loan. If you don’t, this could be why you’re denied funding.
If your employment and income aren’t stable enough, you might want to apply with lenders who accept co-signers. A co-signer is a friend or family member who is willing to act as a guarantor who will pay your loan back in case you can’t. As long as your loved one has a stable income and good credit, they may boost your application.
Mistake #3: You’re Asking for Too Much
A big installment loan amount can scare off a lender, even if you have an impressive salary and credit score. That’s because larger lending amounts signify a greater risk.
The more lenders give, the more they risk not getting back if you default. If you ask more than they’re willing to lend, you may be denied financing — even if you hit all the other eligibility requirements.
Mistake #4: Simple Errors
The paperwork involved in borrowing can be overwhelming. Between getting all your information straight and reading the fine print, you can overlook a simple error caused by autocorrect. With a slip of a finger, you can accidentally type in the wrong bank account number or address. That’s enough to throw off your whole application.
Why? Because most financial institutions will review this information when they run a credit check. Any discrepancies between your application and your social security number, address, or credit report will raise a red flag. It tells the person checking this information you might not be who you say you are!
Rather than risk approving the wrong person, a lender will reject your application instead.
Don’t let one rejection stop you from getting online loans when you need them. Fix these mistakes to improve your chances with the next one.