Personal loans are crucial to meeting emergency needs. It’s now easier to access loans due to technological advancements. Borrowers can apply for online loans from the convenience of their homes via websites or loan apps. However, it’s not always that users’ applications are approved.
Getting an application rejected can feel frustrating and discouraging, especially if the amount was meant to relieve an urgent need. For this reason, borrowers need to know why their online loan applications can be rejected and avoid those mistakes.
Bad or Low Credit Score
An application can be rejected mainly when borrowers have a bad or low credit score. Though online loan companies sometimes do not check the credit score, they may do it occasionally. Lenders use credit scores to understand how likely a borrower is to repay their loans. Factors determining the credit rating include how well a borrower repays their debts or recurring bills.
If one has a history of late payments or over utilizes their current credit limit, it can lead to a bad rating. Some borrowers can also lack a credit score for not using their allotted limits.
It is possible to turn around a bad or low credit score. With this, borrowers should start repaying all loans received on time. A borrower can also try getting loans from institutions where they have established relationships, either through savings or a salary account.
High Existing Debt
Sometimes borrowers can have a very high existing debt with multiple open credit accounts. They can be from other online loan companies in the Philippines, credit cards, or other loan facilities.
When applying for a new loan, the new lender may consider the existing loan burden and reject the application. This high debt is seen as risky.
Notably, some borrowers decide to reduce the repayments of their current loans, which affects their credit rating. If one is in this predicament, they can ensure that they only borrow loans and use credit cards within their repayment abilities.
They should also avoid taking loans that they cannot pay. If they already have these multiple loans, they should promptly pay the installments to keep a clean record.
Missing or Incorrect Documents When Applying
When applying for fast loans, users sometimes fail to provide all the required information or make an error with their documents. Borrowers can also give the documents inconsistent information from the application form.
Doing this can lead to lenders rejecting the application. When applying for a loan, details such as age, income, name, and address are crucial for lenders to create an accurate profile about the borrower.
This mistake is easy for one to avoid. The borrower can check all the information and documents beforehand. For online loans application, a borrower should have scanned documents. They can be originals or copies, but they should read through the requirements to provide accurate documents.
When filling in an online loan application, one should check the spelling of the address and name to ensure they match the documents attached.
Unstable or Low Income
Income is a good indicator of whether a borrower can afford to pay their loan. Apart from having an income, it should also be stable and high enough to meet one’s needs and pay their loans. Borrowers that indicate different employers within a timeline of 60 days or are freelancers can be termed to be in unstable employment.
As a result, they can have fluctuating incomes, affecting their ability to pay an online loan on time. Additionally, borrowers may have stable employment but with a low income. Some online loan companies in the Philippines can have a specific threshold a borrower should meet to get a loan.
In this situation, one can maintain a good employment record, increasing their odds of getting a loan. Having additional sources of income can also boost their ability to get higher personal loans.
Not Meeting Other Criteria
Many online loan companies have internal criteria that borrowers need to meet to receive a loan. Some may have restrictions on specific age groups, residential areas, and other rules they may not share with borrowers.
Additionally, loan companies, especially apps, rely on data scientists’ models to develop internal credit scores that borrowers should meet to get online loans. Falling below these factors can lead to a loan rejection for some time. In such cases, borrowers can engage their targetted institution to find out more and if there is something they can do to improve their chances for loan approval.
Those are some of the main reasons fast loans may be rejected. Borrowers can improve their chances of getting a loan by maintaining a good credit score and employment record. Additionally, they should avoid exhausting their credit limit, which can lead to a higher debt burden.
If an online loan application is rejected, a borrower can regroup and use a co-signer or collateral for secured lending. If it was a mistake in the documents, they can correct this and try to submit another application.