Nobody has an automatic right to credit. None of the banks or other financial organisations have a moral duty to provide every applicant with a loan when they apply for it. They want to make sure that they minimise the risk that they face while, at the same time, making a profit on the amount that they lend.
So while you may feel angry and upset if you are declined for a personal loan, it’s usually worth remembering that there is probably an understandable reason behind the bank rejecting you. It may be because you’ve made some mistakes with money in the past which suggest that you might be an unacceptable risk, that you don’t have a long enough record of obtaining and repaying credit, that your residential status is uncertain or that you’ve had to go to court over a default.
Whatever the reason, every time you apply for a loan and are turned down, you are actually making it less likely that you’ll be accepted with the next application. Banks and other lenders view multiple applications for credit over a short period of time as red flags – indications that something is wrong with your personal financial situation – and they will usually act accordingly.
But there are a number of steps that you can take to increase the chances that you will be accepted with an application for a personal loan from Tower Loan or similar companies. None of them involve suddenly landing a highly paid job or coming into a large sum of money unexpectedly.
- Make sure you are on the electoral roll. If you have moved recently or have neglected to register to vote, then the chances are that you’ll be turned down for a personal loan when you apply. That’s because not being on the electoral roll could be viewed as an indication that you move around a lot and might attempt to escape repaying your debts by changing address. Ring your local council or go to https://www.gov.uk/register-to-vote to make sure that you add your name to the electoral roll.
- Have all of your payslips or accounts up to date. If there’s a query on your application and if the financial organisation wants to check your financial status, it may ask for a year’s worth of accounts if you are self employed or to see your past 12 wage slips. It’s worth making sure that all of these are properly filed all of the time but is particularly important when you are thinking of applying for credit.
- Reduce your overhanging debt. If you’ve got credit cards or an overdraft with large amounts owing, then a bank or other lender may decline your application on the basis that your debt to credit ratio is too high. You can reduce this ratio by increasing your repayments and clearing as much of your overdraft as you can. A high debt to credit ratio is often viewed as a clear sign of financial distress.
- Check your credit record. Before you apply for a loan, it’s a good policy to apply to the three main credit reference agencies for your credit record. Not only will this give you a reasonable indication of whether a loan will be accepted but may increase your chances if you discover mistakes on the records which you can ask to be corrected.
- Get rid of credit that you don’t need. Interest charges on credit cards are usually higher than on personal loans. If you’ve got a number of card accounts and can afford to pay one or more of them off, it may be a good idea to do so. Satisfied credit agreements (ones which have been paid off without late penalties or defaults) always look good when making applications for credit.
- Be truthful. There’s absolutely nothing to be gained by inflating how much you earn or lying about any of your other personal details on a credit application. The chances are that you’ll be found out at some point and it counts as fraud. Making untruthful statements on a credit agreement is both illegal and can lead to you being blacklisted from financial products including insurance and utilities.
- Always include contact information. If there’s a query on your loan application, the lender is going to want to speak to you to resolve the matter quickly. There is a reason why most application forms include spaces for home, daytime and mobile telephone numbers – make sure you include this information to ensure that any queries are quickly resolved and your application can be dealt with quickly and successfully.
- Be prepared to offer security. Sometimes, you may be a borderline case credit-wise and the bank or lender might be inclined to decline your application. In some cases, it may make it easier if you are prepared to offer some form of security to give the lender peace of mind that the loan will be repaid.
- Read the small print. You can the save embarrassment of being turned down by reading the small print in the loan’s terms and conditions to ensure that you are actually eligible for it.
- Apply for a larger amount. Perhaps perversely, there is evidence that the banks are more likely to loan a larger amount than a smaller one. That’s because even though larger loans generally come with lower interest rate charges, the lender is likely to make more in interest over the longer term with a larger amount. If you go down this route, make sure that you are fully aware of all the terms and conditions plus any hidden fees or early redemption penalties before you apply.
Article provided by Mike James, an independent content writer in the financial sector – working alongside a selection of companies including Solution Loans, a technology-led finance broker with many years experience in advising clients of their most suitable type of credit.