Loan rejections can be frustrating, especially when you recently applied for financing a major purchase like a home, vehicle, or other necessity. But all hope isn’t lost. Equipped with tips to overcome a denial, you can take steps to improve your chances of approval on your next financial loan.
Ask Clear Reasons for the Loan Rejection
Don’t assume you know the reasons your loan application was declined. Lenders are required to provide you the specific credit reasons that led to their decision per the Equal Credit Opportunity Act. Ask for a written notice clearly stating why your application did not get approved. Common reasons include high debt-to-income ratios, low credit scores, insufficient credit history, or limited income. Knowing the causes allows you to address them to improve chances of future approval.
Review Your Credit Reports for Errors
One of the first steps is to order free copies of your credit reports from Equifax and TransUnion in case of loan rejection. Review your reports for any incorrect information that may have sunk your application. Late payments, collections accounts, and personal data errors could lower your creditworthiness unjustly. If errors exist, file disputes immediately to correct the mistakes and possibly boost your score.
Assess Areas That Need Improvement
Along with your reports, examine your current credit scores from each bureau. Scores below 620 make approval difficult for many prime loans. If your scores are low, employ techniques to start raising them over the next 3-6 months before reapplying.
Tips like paying bills on time, lowering balances, and limiting credit inquiries provide a starting point for constructive actions that build your scores and help you over come loan rejections.
Talk to Your Bank or Credit Union
For your next loan application, consider applying through your current financial institution where you already have an established relationship. Banks often look more favorably upon existing, trusted customers – especially those with accounts in good standing.
Credit unions in particular may offer better approval odds and interest rates to members. Developing rapport with a lender improves your chances versus applying anonymously online.
Ask About Secured Loan Options
If poor credit is the reason for loan rejection and preventing traditional approval, ask lenders about secured loan products that allow you to pledge an asset as collateral in exchange for better terms. This gives you access to financing while rebuilding your credit history and scores for future unsecured approval.
Provide a Co-Signer if Possible
Adding a creditworthy co-signer with better income and credit scores than you simplifies gaining loan approval and securing lower interest rates and reduces the risk of loan rejections. The co-signer agrees to cover payments if you default. Approval usually requires just one applicant to have strong credit.
Prepare a Convincing Application
Submitting a complete, well-documented application demonstrates your commitment. Have pay stubs, tax returns, financial statements, and any other paperwork ready. Explain any past credit challenges in your application – lenders appreciate awareness.
Also clarify why you deserve approval now through steps you’ve taken to strengthen your credit or income since previous denials. Communicate how you will repay this loan responsibly.
Make a Sizeable Down Payment
While tempting, avoid applying for 100% financing just because it is available. Providing a down payment signals the lender you are financially committed to repaying the loan. Save up 20-30% of the purchase amount as a down payment if possible. This improves approval odds substantially and avoids loan rejections.
Shop Multiple Lenders
Each lender evaluates applicants differently. An institution that declined you previously may approve you now after improving your credit and financial profile. Widen the pool of lenders applied to and compare multiple quotes.
Persistence and learning from past rejections sets you up for success on your next loan application. Implement a few of these tips to get back on the approval track!
We Can Help You Get Approved
The finance specialists at Get Approved Canada have decades of experience helping clients secure financing approval even after initial rejections. We guide you through credit improvement, loan selection, document preparation, and application coaching to position you for loan approval quickly. Don’t let past denials stop you! Contact us today to get started.