Most of us rely on debts to be able to afford some of our needs and wants. Others settle on credit cards for minor purchases. Others need to apply for a loan for major transactions. For example, you can get a car loan to buy a vehicle and a mortgage loan to make a home purchase.
While most lenders are now a lot more forgiving to their borrowers, you will still need to qualify before you can enjoy funding. For instance, you wanted to apply for signature loans here in Salt Lake City to consolidate your debt, improve your home or even to pay unexpected bills.
However, during your application, they refuse to lend you some funds. What can you do next?
Know the reason why your lender rejected your loan application
First, know the reason why you got rejected with a loan. Lenders are usually transparent and can give you a clear explanation of why they denied your loan application. The following are the two common causes of loan rejection and what you can do to avoid them.
High DTI ratio. Lenders will make sure you have enough income to pay for the loan and your other debts. They will compare all obligations with your gross monthly income. It if it’s too high, then lenders may choose to reject your loan. You will need to improve your income each month and pay off some debts to lower your DTI ratio.
Bad credit. If you have poor credit, then your chances of getting loan approval are slim. What you can do is to try and improve your score. Pay your debts on time and avoid late and missed payments. Keep your credit card balances low and only open new credit if needed.
Find yourself a co-signer
If you know someone who is willing to be your cosigner, then this can increase your chances of loan approval. Your co-signer needs to have a good credit score and have a reasonable income. Make sure they know and understand the risks before signing any documents.
In case you fail to pay on time, your lender will go after them to pay for the loan.
Consider paying a larger down payment
Making a larger down payment can help you get approved on your next loan application. You get to lower the amount you need to borrow. You can enjoy lower monthly fees and interest rates. If your lender sees you as a low-risk borrower, they can approve your loan even if you don’t have a stellar credit to start with.
Shop for other lenders
Just because you got rejected the first time doesn’t mean you can never reapply again. However, it pays to wait at least a year before reapplying. Also, it would be wise to shop for lenders. There are many lenders out there willing to lend you some cash.
Of course, you will still need to work on your finances to get better chances of loan approval.
Loans can be incredibly useful if you’re in need of extra cash. However, one needs to be prepared and do a financial check to see if you now qualify for a loan before applying for one. If you got rejected, you could also review this list again, and you’ll know what to do next.