Reasons Why Your Loan Application Was Declined
Banks have a very strict (and often frustrating) process for approving a loan. You can spend hours just acquiring the documents or credit statements, only to hear these words: “Sorry, but you don’t qualify for this loan.”
What are the reasons for a declined loan application, and what can you do to get the money that you need?
Why Your Loan Application May Have Been Declined
Insufficient Proof Of Income
Banks look for proof that you can meet the monthly loan payments, and their key indicator is income level. The higher the loan, the higher the minimum salary requirement—and not only that, but they will also often look at whether the job seems stable.
That can be an issue if you are a freelancer, a new business owner, or have a retainer or project-based position rather than a regular, full-time job. In the bank’s eyes, this type of income is a “risk.”
Unstable Or Irregular Employment Record
If you change jobs often, have gaps in your resume because you stopped working for personal reasons, or lost your job and have only recently gotten a new one, this can also lead to a declined loan application.
Banks will typically require you to have your current job for at least a year or may outright refuse a loan if your resume doesn’t fit the bill.
Low Credit Score
This is one of the most common reasons for a declined loan application. Banks have a minimum credit score, which includes factors like your debt ratio, amount of time you’ve had a card or account, and track record for paying credit cards and other loans on time.
Unfortunately, your credit score can also be affected by factors that are not your fault, like incorrect reporting of payments, or when a closed credit card still shows up. Or, you could have made some innocent mistakes like having too many credit cards or closing an old bank account or card.
Personal factors like financial problems during the pandemic can also affect your credit score—and even if you’ve gotten back on your feet, it will take time to rebuild your history.
Inconsistent Or Incomplete Forms
Banks will ask for several documents and forms, and even a single mistake that leads to a problem with verifying data can cause either a delayed or declined loan application.
Unfortunately, banks also have very long processing times, and it may take weeks for them to contact you and notify you of the problem.
Special Eligibility Requirements
Some banks may require you to open a credit card with them before you get a loan. Others may consider a loan if you have a low credit score or income level but will ask you to find someone to co-sign a loan. That person will also have to go through an eligibility check and submit other documents.
The Purpose Of Your Loan Didn’t Meet Their Criteria
Banks don’t just look at whether you can pay off your loan but will even ask many questions about what you will be using it for. Even personal loans—which should be more flexible, considering the different circumstances and needs an individual may have—go through a lot of scrutiny.
Banks will generally have lenders’ rules that determine the scope or coverage of a loan. Anything that is not on that list will lead to a declined loan application, whether or not you meet other loan requirements.
Options After A Declined Loan Application
The bank refused to lend you money—what do you do next? You can try to request a lower loan amount, look for someone to co-sign a loan, or wait it out and try to build your credit score.
However, for urgent and important financial needs where you have to raise money right away, one option is to apply for a title loan.
A title loan is a short-term loan where you use your vehicle title as collateral. Unlike bank loans, you can apply even if you have a low credit score or no credit score. It also does not have any requirements for work history or income level.
You can borrow from $300 to $10,000 based on your vehicle model, condition, and mileage. You can still use the vehicle during the duration of the loan, as long as you meet the regular payment schedule.
How To Apply For A Title Loan
New Mexico Title Loans has a simple, convenient loan application process! Here’s what you need to do to apply for a title loan with us:
- Fill out the online form.
- Wait for the call of the loan representation from the nearest location. That person will explain the loan process and answer any questions you may have.
- Bring the following to the nearest New Mexico Title Loans branch: driver’s license or state-issued ID card, vehicle title registered under your name, and the vehicle for inspection.
- A branch representative will inspect the vehicle and verify the documents, to determine the loan amount you qualify for. The entire process takes about 30 minutes—much faster than the typical bank process.
- If you get approved, you will receive the money on the same day, or the next business day.
So, if you have a declined loan application from a bank, don’t despair. There are other ways to raise money for urgent financial needs. Contact us to apply for a title loan now.
Note: The content provided in this article is only for informational purposes, and you should contact your financial advisor about your specific financial situation.