What to do if you are Refused a Loan

If you have a loan application refused it can be tempting to just try applying or another one elsewhere. However, this is not a sensible thing to do because if you keep applying it can have a negative impact on your credit record, particularly if you keep being refused. It can also take a lot of time to apply and you could be wasting it. It is worth trying a few alternative things first.

To start with you need to think about whether you really need the loan. If you have savings, then you should use those instead of borrowing money as it is a much cheaper option. It can be difficult to think that you will not have any money to fall back on, but it is a much more sensible option to spend this than to take out a loan, due to the cost. If you have been refused a loan, it could be your only option as well.

Think about what you are getting the loan for and whether it is something that you need immediately or can wait for. If it is not urgent, then it will be better to save up the money rather than borrow. This will keep the cost down. Obviously this will depend on the cost of the item as it is not urgent to buy a home, but you will be unlikely to be able to save up enough to cover the cost of a house if you are paying rent as well, so taking a mortgage is a better option. If you need a car to get to work then buying one could be sensible as you will be able to hold down your job and therefore secure an income which is likely to be worth more than the cost of the loan repayments. If the item you are borrowing for is not needed immediately, then consider waiting a while. You could save some money each month, perhaps the equivalent of what you would have been paying in loan repayments and buy it without having to go into debt.

It is worth considering whether you will be able to afford loan repayments if you are going to reapply for a loan. Work out how much you will have to repay each month and think about whether that is something you can afford. Consider whether you will be able to easily afford it or whether it will be a struggle as well. If you might struggle, then it could be worth looking for an alternative. Remember that interest rates could rise and this might mean that you repayments will be even higher and other bills and costs could go up as well. Your income may not go up in line with this and therefore you will need to make sure that you will still be able to manage in this situation.

Another thing to check when you are refused a loan is your credit record. You may find that you have some mistakes on your credit record which are holding you back in your application. It is worth taking a look at it, which can be done for free and making sure that everything is correct. It is possible that there are incorrect items on there, perhaps debts listed as outstanding which have been paid off. You may find records of debts which you have forgotten to pay which you may be able to settle in order to improve your credit record. There may be debts that you are aware of having, which may also need to be settled in order to improve things. Perhaps concentrating on paying these off before you borrow more money may be wise and may help your credit rating as well.

It can also be wise to ask the company why they refused you the loan. Find out what the reason was behind it as you may find that it is based on something which is incorrect and you can talk them round. It is more likely to be to do with your credit record, but if you can find out exactly what the reason is, then you will be much more likely to be able to rectify the problem.

It is easy to think that if you are refused a loan then the simple solution is just to apply for another one. However, this can actually make things worse and so it is worth looking through the tips listed above first and finding out whether there is an alternative to the loan and whether you can do anything to make future applications more likely to be accepted. It will take some time and effort but could pay off in the long term by helping you to have a better financial future and a less costly one as well.

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