Your Loan Application Was Denied, Now What?
Instead of re-applying with another lender immediately or giving up on yourself, look at your denied loan application as a blessing in disguise
Lenders consider a lot before they decide to approve a person for a loan, and there are multiple reasons why a person’s application might be denied. Loan denial is not a good feeling, but instead of re-applying with another lender immediately or giving up on yourself, look at your denied loan application as a blessing in disguise. Understanding what your options are post-loan denial is the best thing that you can do for your financial health.
Canada Drives specializes in helping Canadians with no or low credit find affordable financing, so it’s rare that a person isn’t approved for a loan with us. However, on the off chance that this happens, we always suggest that the applicant does the following three things:
1. Review Your Credit Report
Whether it’s a car loan, personal loan or credit card – the information that you have on your credit report determines if you’re a good candidate for taking out a loan or not. Errors on a credit report isn’t uncommon, and having errors will influence a lender’s decision. If you’ve been denied for a loan, request copies of your credit report from the major credit bureaus and look closely for any inaccurate information. One in four people have errors on their credit report, and even the smallest red flag can cause your credit score to drop substantially. If you see something on your credit report that doesn’t look right, call the credit bureau and dispute what you believe to be wrong.
2. Look at Your Debts
This might seem like an obvious suggestion, but we mean really look at your debts. The only thing that lenders know about you is the information that you have on your credit report. Consider your debt-to-income ratio, how frequently you make payments, if you have any recently acquired debts or if you have any negative marks on your credit report from bankruptcy or collection agencies. Alongside your debts, look at how much money you have saved too. If you already have a ton of debt, are unemployed or have only been working for a short amount of time, consider getting a solid savings plan in check and try to knock down some of your debt before you re-apply for a loan.
3. Know Your Alternatives
Reviewing the reasons why you might have been denied for a loan will help you better understand why your application was rejected. Sure, you didn’t get approved for the loan that you spent hours applying for, but that doesn’t mean that you never will. If you’re trying to take out a personal loan to better your credit score, consider taking out a secure credit card to help boost your score and then try for a loan in the future. If you’re prepared to start building better financial health but don’t know where to start, talk to a credit counselor for help with budgeting, paying off debt and getting your credit report back on track.
If your loan application was rejected, don’t give up hope. Take a loan denial as a sign from the universe that you have some reviewing, investigating and saving to do before you re-apply.