If you have been repeatedly turned down for a personal loan, you should first find out why. The answer may surprise you.
You may have had a high debt-to-income ratio or a high credit utilisation ratio, but this isn’t the only reason why you’ve been turned down.
Other reasons could be long-term debt or mistakes in your credit file. There are options, however.
Credit utilisation ratio
If you keep getting declined for personal loans, it may be due to your credit utilisation ratio. This is a number calculated by subtracting the total credit limit from your available credit.
While you may not be able to avoid exceeding your credit limit, you can lower your credit utilisation by managing your credit card usage.
Credit reports are available from Experian and Equifax.
The credit utilisation ratio is based on the total amount of your debt against your available credit. Your ratio is higher if you have multiple credit cards with high credit balances.
It’s not possible to lower your credit utilisation by moving the balance to a new card. The best way to lower your credit utilisation is to reduce your overall debt by a large margin.
However, you’ll have to bear in mind that your credit score is calculated based on a metric that is hard to manipulate.
If you keep getting rejected for personal loans, your income is likely the problem. Most lenders do not publish their minimum income requirements, so you can never be certain if you will be approved.
Another common reason for rejection is your debt-to-income ratio, which lenders use to determine whether you have enough money to make the payments. If you’re unable to make your repayments, try to re-apply for a smaller loan until you find one that fits within your budget.
Your debt-to-income ratio (DTI) is calculated by taking your total monthly debts and dividing them by your income.
A high DTI signals to lenders that you may struggle to make repayments. The goal is to keep your DTI below 35%. If you can reduce your DTI to 35%, you’ll be better positioned to qualify for personal loans.
If you keep getting declined for personal loans, you’re not alone. You are probably wondering, “Why do I keep getting rejected for personal loans?”
You can do a few things to fix your situation. Try to improve your credit score by paying down debts and improving your debt-to-income ratio. Another option is to apply for a personal loan with a cosigner, who must have a good credit score and reliable income. Or you can consider a joint personal loan where you both share the loan funds and the responsibility of paying it back.
The main reason why people keep getting rejected for personal loans is because they don’t have enough income. It is important to note that 76 percent of people applying for personal loans are turned down.
However, it doesn’t have to be this way. There are several ways to overcome this problem, which are described below. One way is to apply for a smaller loan, which may be more affordable for you.
Mistakes in credit file
Many people face rejections for personal loans because of mistakes in their credit file. Although mistakes can happen in the filing process, you can fix these mistakes by contacting the credit bureaus and sending a dispute letter.
If you’re unable to resolve the issue on your own, consider hiring a credit health improvement company to do the work for you. It can help you repair mistakes that can have detrimental effects on your credit score.
The best way to fix mistakes in your credit file is to read your credit report carefully. If you see anything that’s not right, dispute it immediately.
Unfortunately, building a good credit history is a catch-22. Once you’re in debt, it can be difficult to build your credit score. Fortunately, there are plenty of short-term loan companies that can detect errors in your credit file.