It is always disappointing when a loan is declined. But the reasons for this are always the same. Below you will find a list of the 3 most common reasons for rejection, as well as tips on how to take action against it.
Loan cancellation due to low income
It sometimes happens that despite regular income, no further loans and a good Credit bureau Score, the loan is still rejected because the income is too low from the banks’ point of view. Lenders look at the amount of income mainly because of the statutory garnishment limit. The income, which is underneath, is not available to the banks in the event of a seizure.
You cannot change your own income, but the situation can be improved by involving a citizen as a second applicant. Two salaries offer a bank more collateral than a salary, so you can often get a loan approval even if your own income is too low.
Credit cancellation due to existing financial liabilities
If you already have one or more loans, it is often difficult to get another loan approval. The reasons for this are obvious – borrowers should be protected against over-indebtedness.
If you still need financing, the solution can be debt restructuring: the loans are combined and a large loan is obtained instead of several small loans. With the large loan, old loans are paid off and the remaining amount goes to a current account. Often this not only reduces costs, it also reduces monthly costs.
Credit cancellation due to lack of collateral
It can also happen that despite a regular job and good earnings you get a loan cancellation. It can be due to the following: bookings from debt collection companies, often overdrawn accounts, irregular income (e.g. with self-employed), negative entries with Credit bureau, etc.
You can hardly change anything here, and yet you shouldn’t despair. There are lenders who have less stringent lending criteria. Here it is worthwhile to submit credit inquiries to other potential lenders. Another option would be to consult a financial advisor who, thanks to his broad financial knowledge, could offer you a suitable solution.