| Refused credit
loans are a key component of your business/personal requirements.
A credit loan can be acquired from different agencies like banks,
brokers, finance companies etc. If a business owner or an individual
needs an amount of money on credit, the individual has to pass some
checks on their financial status before the loan can be approved.
The background checks are essential to ascertain whether the individual
person can pay back the loan amount within the stipulated time.
The results of the credit check are then tabulated and the risks
are analysed before you are offered the credit
loan. If you are refused a credit loan, there would be a number
of reasons as to why that would have happened. Discussed below are
the important facts that are always checked by the lender.
The primary factors that are vital to your credit loan approval
are:
- Your current earning capacity
- The stability of your job
- The legitimacy of the collateral that you provide
- Your past credit loans and returning history
- Your references
Your current job/business earnings:
This is of prime importance as it indicates how much you are earning
currently and accordingly provides an indication as to the amount
that you can repay per month. The current job or business earnings
also decide a rough estimate of your future earnings and thus your
repayment ability. A positive indication of your financial position
is if your earnings are far more than your monthly debts.
Job stability:
This is ascertained by checking your employment history to find
out if you have had a stable history of jobs and that you are not
prone to losing jobs without a valid reason. This helps the company
lending you the money to understand how stable you are in employment.
The collateral and their legitimacy:
The collateral that you provide against the secured
loan amount is checked for its legitimacy. The collateral can
be your personal assets or assets belonging to your family. Their
market value is assessed and checks are also done to make sure you
have not already mortgaged them. Also the liquidity of your assets
is found out to regain the amount of the credit from you, if you
are not able to pay back the loan.
Your credit history:
The credit reports of an individual have all the information related
to their personal/business credit. This check is done to analyze
the data related to all your past credit transactions. The credits
scores are a result of calculations taking into account, your current
loans, debts and payment history. If you have had a bad
debt or have filed for bankruptcy any time, it will go against
your chances of getting fresh credit. Such problems with your repayment
may cause you to end listed as a defaulter and qualify you only
for a bad credit loan. Also the bad credit history can mar your
chances of getting loans at lower rates and you may get a loan albeit
at a much higher rate. Although regular lenders may not give you
loans, there are specific lenders who specialise in giving such
bad credit loans.
Your references/guarantors:
The references of the people that you provide are cross checked
to find out if you are a person of character and stability. The
guarantors would be required to repay the entire amount if you are
unable to fulfil your payment obligation.
If you fail to clear any of the hurdles mentioned above, the credit
company can refuse
the loan. In such cases you can find out the reason why you
were refused the loan amount. After getting the information, you
can work on those factors so as to improve your future chances of
getting a loan.
The main factors that highlight you as a bad credit person are:
- Default payments of past loans
- Late repayments
- Filing for bankruptcy
- Bounced cheques
- Multiple credit cards with unpaid balances
Lenders also have different reasons for refusing loans depending
on how critical or flexible the type of loan is. Some unsecured
loans are difficult to qualify for and hence lenders more often
than not, have to reject your application in such cases. Most lenders
depend on the credit scoring system which is a standard mode of
appraising a borrower. Ensure that all of the above factors are
taken care of, before approaching any lender for a loan.
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