Being denied for a personal loan can be disheartening, especially if you’re in the middle of a financial emergency. Whether you’ve been denied for a bank loan or even a credit card, there are several steps you can take to move forward.
Find Out Why Your Application Was Denied
Information is always a good thing, and asking why your loan application was denied can help you pinpoint where to start fixing the problem. Perhaps your credit score was too low or you had too many missed payments show up on your credit report. When you know what type of behavior is prohibiting you from achieving your financial goals, you can then take specific actions to change. Also ask which credit bureau the lender consulted and request a free copy of your report so you can see exactly what they see. You are allowed a free report from each of the three credit bureaus every 12 months, which you can request at www.annualcreditreport.com. This is also a good idea because you can check to make sure there weren’t any mistakes made during your application review.
Take Appropriate Next Steps
Once you know why you have been denied a loan, it’s time to make a game plan. The first thing you should do is stop applying for loans because each loan application triggers a hard pull on your credit report. This results in a lower credit score which will continue to decrease your chances for approval. Before applying for a loan, try to address any issues the lender had with your application. Since timely payments account for the largest part of your credit score, be sure to pay all of your bills on time from now on. If you have too much debt, talk to a financial adviser about potentially consolidating your current loans. If you don’t need the new loan money quickly, try to aggressively pay down your debt to lower your debt-to-income ratio. If you’ve had too many inquiries, consider waiting them out. While hard inquiries remain on your actual credit report for two years, they only impact your credit score for 12 months. View our toplist for more information and details.
Consider Alternative Lenders
A traditional bank loan or credit card isn’t the only way to access additional funds. Payday lenders and online peer-to-peer lenders are other options for accessing loans with imperfect credit. The type of alternative loan you choose depends on how much money you need and how quickly you need it. Payday loans typically lend smaller amounts in a short turnaround time, while peer-to-peer loans offer larger amounts with a longer repayment term.
Don’t feel defeated if your loan application has been denied by a lender. Instead, view it as an opportunity to reevaluate your financial situation and take a different path to achieve your goals.