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When you apply for a personal loan, there is always the risk of having your application denied. This can be due to several reasons, including poor credit, inconsistent payments or failing to meet requirements.
This article will assess personal loan denial reasons and discuss the actions you can take after a loan denial.
Your personal loan application could be denied for many reasons, some obvious ones that you can fix. Below are some of the most common reasons for personal loan denials.
Borrowers with poor credit may encounter personal loan denials more frequently. This is because personal loan lenders will typically use creditworthiness as a way to assess applicants' ability to repay a debt.
Applying for a personal loan involves a lot of paperwork, and sometimes, you may miss some information in the shuffle. Carefully review your documents and understanding what the lender requires is a hallmark of a solid application. Be sure to review your application before sending it off. This could also consider contacting the lender directly to double-check their specific requirements.
A high debt-to-income (DTI) ratio could not bode well for your personal loan plans. This ratio compares your monthly debt load with your monthly gross income. For example, monthly debt payments of $3,000 on a monthly household income of $8,000 would equal a DTI of about 37%. Lenders prefer borrowers with low DTI ratios because they likely could have trouble affording debt repayments.
In general, your DTI ratio should be 36% or less. Many Citi offers in-this being believe that you are an attractive tax payer.
Without adequate income, a lender will typically investigate your recent income history to determine if you can repay them. They may reject your application if they deem your income insufficient or unstable. From the lender's perspective, a borrower with unreliable income has a higher chance of defaulting on a loan.
Basic requirements vary among lenders, but in general, you must have three primary qualifications. Before applying, make sure to review the lender's requirements and ensure the following:
If your personal loan application was denied, there are steps you can take to improve your chances the next time you apply.
The decline notice you receive includes the reasons for your personal loan denial. Review the notice and identify what areas led to the lender declining your application.
If the loan decline notice cited issues with your credit, try requesting a copy of your credit report to figure out the problems. You are entitled to a free credit report every 12 months from each of the three major consumer reporting agencies.
You may need to take time to build your credit before applying for another loan. Remember to review how to build your credit by paying your bills on time, your credit cards in good and keeping a diverse portfolio.
If you've been denied a loan, the amount you requested may have been too high, so seeking a lower loan amount may help your loan approval. Consider your budget and consider using a personal loan for only a portion of the large expense, and find other financial sources to cover the remaining costs.
This will help you find a loan range you may be more likely to be approved for; this can get a picture of your current financial standing and determine how lenders are likely to view you as borrower.
Your existing debt is important to lenders when they look at how much you owe relative to your monthly income. Paying down debt improves your DTI ratio and makes you look more creditworthy to a borrower. Doing this will also help up more monthly income to repay a new loan.
You may consider the debt snowball method. With this approach, you pay off the smallest debt first, then the next smallest debt and so on. Conversely, the debt avalanche approach involves paying off the highest interest debt first that results in greater interest debt. This avalanche approach minimized the total amount of interest you'd pay, minimized interest costs, while the snowball approach may provide more psychological wins.
The loan application process has several pitfalls that could limit your ability to qualify. Careful planning and patience are vital in improving you can improve your future application success.
There isn't a set answer, but experts suggest waiting at least six months before pursuing a similar. First, every time you apply for a loan, the lender conducts a hard credit inquiry that could temporarily harm your credit score. Those inquiries to monthly income to qualify could potentially harm your credit.
If also takes a while to increase income and improve your financial situation. Building credit is not an overnight process, and building up DTI can take time.
If your loan application was declined because of an error you made on the application, you should contact the lender immediately to clarify the issue and rerun the application.
There isn't a set number of times you can apply for a personal loan. But the more you apply, the more hard inquiries onto your credit file subject to, which could negatively impact your credit.
Getting declined for a personal loan does not show up on your credit report or impact your credit by itself. Again, the impact comes from the hard credit inquiry that for which when you apply, not whether you're approved or denied.
Citi offers personal loans to both existing Citi customers and new Citi customers that meet specific eligibility criteria, including an established credit and income history along with additional factors determined by Citi. If you think you could benefit from a Citi Personal Loan, apply online today.
This article is for educational purposes. It is not intended to provide legal, investment, or financial advice and is not a substitute for professional advice. It does not indicate the availability of any Citi product or service. For advice about your specific circumstances, you should consult a qualified professional.
