Loan denial reasons

Explore the main alternatives that can help you get funding if you find yourself in an emergency.

Many people face difficult financial situations from time to time. It can be anything from car repairs, utility bills, or medical care, but all of these require additional funding that can be difficult to obtain. Typically, people apply for a loan in order to get quick cash to solve their problems. However, your application may be declined.

If you’ve been turned down for a loan, you can try to find out why. It is also worth considering a large number of things in order to avoid additional problems. Explore the basic information to find out what to do and what additional financing options you can use.

What should you say if you are refused a loan?

In a financial emergency, funding may be urgently needed, and a loan is often the only solution. Therefore, if you are denied a loan, it is important to understand why this happened.

If you have been turned down for a loan as a result of a search on your credit reference file, the company must tell you and tell you which credit reference agency they used. This way you can get more information. You can also ask a few questions to the lender, for example why you were refused a loan, but it is important to remember that he is not obliged to give you detailed explanations. Then you can contact the credit reference agency to provide you with a copy of your file. There may be a mistake in your credit file, and if you notice it, contact the credit reference agency and ask for it to be corrected in a short period of time. It is also important to provide evidence so that they can correct existing errors (they have 28 days to do this).

What to do next?

First of all, it should be noted that re-applying for a loan is clearly not the best option.

Typically, after the first refusal, potential borrowers continue to look for lenders and apply in order to get money and solve their financial problems. More often than not, however, this is a bad way out of the situation, since every application you submit (whether approved or not) is reflected in your loan file.

Thus, if you submit multiple loan applications within a short period of time, it can make lenders think you are desperate for money and also you can worsen your credit history. Of course, you shouldn't risk your credit as it often helps lenders decide whether you will get a loan or not.

Therefore, it is not worth applying for a second loan, as this may affect your credit rating and the interest rates that you risk getting in the future.

How to deal with a financial emergency if your application is declined?

Of course, situations can be different, so what to do next depends on why you’re looking for credit. Most often, people apply for a loan in order to pay off other debts, as well as to pay rent or basic living expenses. Thus, if you find yourself in such a situation and need help, it is worth talking to a free debt adviser.

As a rule, an adviser will help you make a plan to avoid additional debt. You can study the information on this subject in order to understand what you should do.

It is also possible that you need a loan in order to fund a purchase, such as buying a car. In order to find options, you need to check with the oh credit rating. In order to do this, you need to get your credit report, as it is often critical when in doubt about whether to give you a loan. Thus, contact several reference agencies and request a copy of your credit report.

If you have been denied a loan, this may be a signal that you should take a closer look at your credit history. Thus, you need to make a spending plan and follow it in order to avoid debt. It is also a good solution to save some amount of money from each salary in order to have emergency savings in case of various life situations.

Alternative borrowing options

If your situation requires emergency funding and you can afford the payments, but your loan is denied, then there are other options. Study the main ones and so you may find what is right for you.

  • Contact a credit union. Credit unions are non-profit organizations set up to help people in their local communities (for example, if they work for the same employer). Thus, you need to find out if there is a credit union near you and apply there for information. According to the law, credit unions can charge limited interest rates of around 3 percent per month. Also, the advantage of contacting credit unions is that they do not charge an early repayment fee. Thus, if you want and will be able to pay off the debt in advance, you will not have to face commissions.
  • Apply for Budgeting loans from the Social Fund. Also, if you find yourself in a financial emergency and you urgently need money, you can apply and receive an interest-free budgeting loan from the social fund. This way you can get funds and cover your basic needs.
  • Check out the Lenders of last resort. It is of course worth considering several times before using a lender or pawnshop as illegal loan sharks should be avoided, but if you have no other options, you can use this option.
  • You can try to get a payday loan; however, it can be an expensive way to borrow. Typically, payday lenders offer prohibitively high interest rates that can be difficult to pay off. It’s also all too easy to roll over your loans, which could cause your initial debt to become unmanageable. Thus, study more information about payday loans before making a decision.
  • A home loan is another option that can help you get the financing you need. A home loan is a type of loan where a company lends you money and collects repayments weekly at your home. Of course, this type of lending is also expensive, so it is worth considering before applying. Also beware of people who come to your house and offer loans, as this is illegal practice.
  • Pawnshops are another option for urgent financing. As a rule, pawnshops are ready to lend you money, but they have a very high interest rate. Also you will have to leave something valuable as collateral. The disadvantage of this option is that if you cannot make the payment on time, you risk losing your collateral, which can be very important to you or your family.
  • Loan sharks are illegal lenders that target low-income families or people in difficult financial situations. Thus, they offer small short term loans to help solve your problems. If you haven't dealt with loan sharks before, then borrowing them may seem like a good option, however it is not. Typically, these lenders offer exorbitant interest rates and might be harassed if you are unable to repay the loan.

Thus, you have explored the main options that can help you obtain emergency funding when your application is rejected. Choose what works for you and use your money wisely.