It’s always disappointing when you’re rejected for a loan, especially if you thought you had a good chance of being approved.
So why was your moneylender loan rejected?
There could be any number of reasons, but some are more common than others.
In this blog post, we’ll look at the most likely reasons loans are denied and what you can do to increase your chances of being approved next time. Stay tuned.
Reasons Why Your Loan Application Was Rejected
Let’s look at some of the reasons your loan application may have been denied:
1. You Have Bad Credit History
Your credit history reflects your financial responsibility in the past. This is why it is one of the most important factors lenders consider when assessing your loan application.
When money lenders look at your credit history, they can see all activity on your active and inactive accounts. If your credit history is full of late or missed payments, defaults, or bankruptcies, you’re a high-risk borrower.
Your credit history and financial health are also measured in a statistical number called a credit score. The lower your score, the less trustworthy you are.
In other words, money lenders are looking for borrowers with a strong credit history and score, as this is an indication that they’re more likely to repay the loan.
So remember, a personal loan with bad credit in Singapore will likely be rejected.
2. You Don’t Have A Steady Income
Another important factor money lenders consider when assessing loan applications is your income. Money lenders want to be sure that you have a steady and reliable source of income so they can be confident that you’ll be able to repay the loan.
If you don’t have a steady income, your loan application will likely be rejected.
3. You Already Have Too Much Debt
Your debt-to-income ratio (DTI) is the percentage of your monthly income that goes toward repaying debts. Lenders use this ratio to assess whether you’re able to take on more debt.
A high DTI indicates that you’re already struggling to repay your existing debts and may have difficulty making loan repayments. For this reason, most lenders will reject applications with a high DTI.
4. You Made Mistakes On Your Application
When you’re applying for a loan, it’s important to double-check your application for any mistakes. Any errors on your application form can give lenders the impression that you’re not detail-oriented or trustworthy.
This can lead to your application being rejected, even if you otherwise meet all the requirements.
5. You’re Applying For A Loan That’s Too Large
Another common reason for loan rejection is applying for a sum that’s too much. Lenders will only approve applications for loans that they think you can afford to repay.
If you’re requesting a loan amount that’s too high, your application is likely to be rejected.
How To Avoid Being Rejected
Now that we’ve looked at some of the most common reasons for loan rejection, let’s take a look at what you can do to avoid being turned down:
Confirm You Meet The Eligibility Requirements
Before you apply for a loan, make sure you meet all the eligibility requirements. Each lender has different criteria, so be sure to check with your chosen lender before you apply.
Check Your Credit Score
This is one of the most important factors lenders consider when assessing your loan application. Check your credit score before applying for a loan to ensure it’s in good shape.
If you are wondering, “how to check my credit score in Singapore?” you can purchase your credit report from Credit Bureau Singapore.
Improve Your Debt-To-Income Ratio
As mentioned, your DTI is another important factor that lenders consider when assessing your loan application. If your DTI is too high, it indicates you may have difficulty repaying the loan.
To improve your DTI, you can either increase your income or reduce your existing debts.
Ensure Your Application Is Accurate
Be sure to double-check your loan application for any mistakes before you submit it. Any errors on your application could lead to your loan being rejected.
Choose A Loan You Can Afford
Applying for a loan you can’t afford is one of the surest ways to have your application rejected.
So choose an amount you can afford to repay. If you aren’t sure about how much you will need to pay each month, a personal loan calculator can help you determine an estimated amount.
Following these tips can avoid the most common reasons for loan rejection.
How To Improve Your Chances Of Getting Your Loan Approved
Let’s look at some ways you can increase your chances of getting your loan approved.
Apply With A Good Credit Score
Since money lenders check your credit score before approving the loan, it is wise to apply with a good credit score. Find ways to improve it first if you have a bad credit score.
Take Small Loans
Asking for a smaller loan will keep the red flags away and help build trust with the lender. It will also improve your credit score if you repay it on time.
Earn A Steady Income
Having a regular income gives lenders the confidence that you will be able to repay the loan on time.
Reduce Your Existing Debt
High outstanding debt is one of the reasons for loan rejection. So try to pay off some debt before applying for a new loan.
Make Sure Your Application Is Error-Free
Lenders check your application carefully for any errors. So make sure it is error-free to avoid rejection.
Borrow From A Reputable Licensed Money Lender
Was your moneylender loan rejected? It’s not the end of the world. You can try again. One of the best ways to avoid loan rejection is to borrow from a reputable money lender.
Reputable and licensed money lenders are more likely to offer you guidance and support throughout the loan process. They are also more likely to have flexible repayment terms to help you manage your finances.
So choose a money lender with care to avoid loan rejections or scams.