A loan can change someone’s life for better. The process of getting a loan is not easy as your application might be rejected sometimes. Your dreams might be shattered when your loan is rejected. This might lead you to some troubles in future. You should not fear to apply for a loan since it is not always rejected. These are some of the conditions that you need to aware of as they might lead to rejection of your loan.
Bad credit score
Most of the credit details of every individual are shared with the financial institutions. This information is shared by the Credit Information Bureau Companies of the respective countries. These details include all the present and past information of the borrower’s loan transactions. The creditor’s credit information is provided to the Credit Information Bureau companies by the banks. It is this information that is used in creating the borrower’s credit information as well as computation of the credit score.
The scores are usually awarded based on the information provided. The scores range from 300-900. This report is provided to the banks once you apply for a loan.
You might become a guarantor for your friend or family member. This could pose a problem to you in the case the loan defaults. This might make to be enlisted as a defaulter as well, and you could have your name listed by the credit bureau. This might seem to be unfair, but it is how the system operates. You should be very careful when you are acting as a guarantor.
The applicant’s job is very crucial when it comes to borrowing money. Sometimes it might be very challenging when you are applying for a loan in case you keep on changing your job more frequently. You will have an added advantage when it comes to loan application if your employment record is stable. Most of the loans are given based on the borrower’s employment record. This gives an idea of someone’s financial stability.
Too many loans
Any existing or outstanding loan is likely to affect your borrowing capacity. This will determine the amount of loan you are eligible to apply. The existing loan is used in calculating your loan to income ratio. This is calculated by the bank before it extends your loan.
Any applicant who was rejected in the past is likely to be rejected. One should be very sure when applying for a new loan. You can do this by determining your credit score before you apply for a loan. Only apply when your probability of getting a loan is high.