Regardless of what loan you are applying for, there is always the risk of your application being rejected. Credit refusal can be caused by many factors. For some reason, the bank thinks you are not trustworthy. However, this is not a hopeless situation. Find out what to do when a bank refuses to grant you a loan, loan or credit card. What you will learn in this article:
Refusal to grant a loan or loan - what could be the reasons
Credit refusal without giving a reason - can the bank do so?
What to do if the bank rejects the loan or loan application?
Rejected credit application - what mistakes should not be made when applying again?
What else is worth remembering when the bank refused to grant a loan?
The refusal to grant a loan by a bank is not the end of the world. You can still apply for a cash loan or a mortgage from another bank. Before that, however, it is worth looking at the reasons for a negative decision. For what reasons do banks most often reject loan applications? We answer!
Regardless of the type of loan you are applying for, the basis for issuing a decision on granting it will be the verification of the loan application. When checking it, banks first take into account:
the correctness of the completion of the loan application form - are all data provided and the required documents attached, e.g. a certificate of earnings,
the borrower's identity - data from the ID card as well as address and contact details are verified,
fulfillment of formal requirements - regarding e.g. age, citizenship or possession of a valid identity document and the required source of income,
creditworthiness - its analysis is of the greatest importance for banks because it determines the borrower's financial ability to repay the liability; for its examination, banks use special algorithms and take into account a number of factors - mainly income (their monthly amount and source of obtaining, i.e. the form of employment) and liabilities (the most important are: the total amount and type of loans repaid and fixed costs of living),
The method of verifying the loan application may differ from bank to bank. It happens that institutions, when issuing a decision on granting financing, take into account many more factors, e.g. the borrower's place of residence, his housing status, education or profession.
You already know the factors that play a special role in assessing your loan or loan application. If your bank notices a problem in any of the above-mentioned areas, you may have trouble getting funding.
The most popular reasons for rejecting an application for a mortgage, cash, car or consolidation loan are:
lack of creditworthiness - having a low income or high installments of previously taken loans to be repaid, which exceed a certain amount of income, reduce or eliminate the chance of receiving financing;
low scoring - consists in verifying the personal data provided in the loan application, the BIK scores are largely taken into account. On this basis, the bank assigns us to the appropriate group of customers. Depending on which group we are assigned to, we can receive such a loan offer;
lack of stable employment - in the case of a fixed-term employment contract, banks pay attention to the duration of the contract, and sometimes also to the backward duration of the contract and its repeatability. To receive a loan at the time of submitting the application, you must have an employment contract for a minimum of 6 more months;
too many loan inquiries - going from bank to bank and inquiring about loan offers may result in sending too many inquiries to BIK. This is a signal for the lender that such a customer may have just obtained a loan from another bank;
having non-bank obligations - taking a payday loan in a parabank and failure to pay it on time reduces the chances of getting a loan on good terms;
delays in repayment of liabilities - if the delay in repayment occurred only once and did not last longer than 30 days, then after the payment of the amount due, there should be no problems with getting the loan. When the delay exceeds 30 days, you have to take into account a negative decision;
no consent of the spouse to take a loan - some banks require the consent of the other half to take a loan. If it is not granted, the loan application is rejected;
too many loans taken in a short time - mindless indebtedness to banks and non-banking institutions, even for low amounts, may result in refusal in the event of submitting an application for financing for a higher amount (also for a consolidation loan);
low age of the borrower - each bank individually sets the age groups in which the person applying for a loan must be. For example, when a lender provides financing to people between the ages of 21 and 75, who are less or more years old, there is no chance of getting a loan (although some credit institutions make exceptions);
uncertain source of income - refusal to grant a loan may be faced by entrepreneurs running a business, people working abroad, customers receiving a pension or allowance, as well as people employed under a mandate contract or contract for specific work;
exorbitant credit conditions in a given bank - the bank's internal regulations may contribute to a refusal to grant a loan, so sometimes it is worth consulting a specialist who will look at our profile and advise where we have the best chance for a loan;
incorrectly completed application - just forget to provide one important information or enter it in the wrong field and the bank will reject our application;
work in a "forbidden" industry - banks are guided by risk when granting loans, which is why there is such a thing as reserved industries. Clients working in such industries may have less chance of getting a loan from some banks.
"Unfortunately, the bank cannot grant you a loan", "We are sorry, but the system's verification of your creditworthiness is negative", "I have a negative answer from the analyst" - this way, a bank employee can inform you that your loan application or a loan has been rejected. Until recently, the bank was not required to inform you about why it rejected your loan application.
Currently, it is illegal to refuse a loan without giving any reason. On May 4, 2019, the amendment to the Act of August 29, 1997 - Banking Law entered into force, in which some changes were made in this matter.
Art. 70a of the Act, according to which "banks and other institutions legally authorized to grant loans at the request of a natural or legal person or an organizational unit without legal personality, provided that it has legal capacity, apply for a loan, provide a written explanation regarding the self-assessment of the applicant's creditworthiness ”.
The bank's refusal to grant a loan must therefore contain an explanation including information on the factors that influenced the assessment of creditworthiness. Natural persons receive such explanations for free, while entrepreneurs have to reckon with the fact that obtaining such information will have to be paid.
Importantly, appropriate explanations are provided for each type of loan. So it does not matter whether the bank refuses to grant a mortgage or a consolidation loan - you always have the right to know the reason for such a decision. Such information is very valuable from the borrower's point of view. Thanks to it, you know what elements need to be improved in order to receive a loan.
In the event of rejection of a loan application, it is in your interest to ensure that the bank complies with applicable regulations and provides a justification for the refusal of the loan. It may turn out that the reason for the negative decision was a problem that can be solved quite easily. An example is an incorrect entry in the debtors' register of arrears that have been paid long ago. In such a situation, it is worth submitting an application to the creditor to correct the data and apply for a loan again.
On the other hand, if the reason for the refusal of the loan was low income, you can try to apply for a lower amount of the liability. Knowing the reason for a negative credit decision, you can also check how other banks view a given factor.
A bank refusal to provide financing does not mean that you lose your chance to borrow money altogether. What to do when the bank does not want to grant a loan? First of all, it is worth finding out what was the reason for the rejection of the application. Knowing it, you can eliminate it (e.g. pay off arrears or try for a better form of employment) and reapply for a loan from the same or another institution. Here are some tips on what to do next when your mortgage or cash denial has become a reality and you still need money.
If you want to know what was the reason for the bank's refusal to grant a loan, submit an application for justification of the loan decision. According to the law, as a bank customer, you are required to submit a request for clarification. The bank will not give it to you automatically.
The application for justification of the refusal of the loan should be submitted to the same bank that rejected it. It is even enough to write a handwritten request for information why the decision was the same and not different. You do not need to attach any documents to such an application. However, do not forget to provide the necessary data.
Asking the bank to explain the reasons for refusing a loan is beneficial not only because you can find out, for example, about poor creditworthiness or some arrears in the BIK or BIG databases. It very often happens that after receiving such a request from the customer, the bank re-verifies his loan application and this time it does it more thoroughly. So it may turn out that the reason for the refusal was some trivial error in the form or a computer system error, which this time will not be an obstacle to making a commitment.
Re-applying for a loan from another bank is worth considering, if only because each institution has a different credit policy and a different way of analyzing the customer's ability to pay off the liability. If you find a bank that is promoting a credit card or a cash loan, for example, you will potentially have a better chance of receiving financing. In such a situation, institutions usually facilitate access to the promoted product and, for example, reduce creditworthiness requirements or simplify formalities.
In some cases, it is worth applying for a loan at several banks at the same time. Specialists advise to do this, for example, when applying for a mortgage. When granting it, banks use very complex algorithms and individually defined criteria for granting financing, which is why it very often happens that out of, for example, three or four institutions, only one will consider the application positively.
Sometimes, however, it is worth refraining from submitting an application to another bank, e.g. when the reason for refusing a loan at the previous institution was arrears in repayment of other liabilities in BIK or BIG. First, you have to regulate them and wait for the creditor to update the data in the databases, which may take up to several weeks. Unfortunately, arrears in the databases will cause most banks to reject your application.
In a situation where subsequent banks refuse to grant you a loan, you can consider using the services of a non-bank loan company. Such institutions are a bit gentler in assessing creditworthiness and are even able to turn a blind eye to arrears in repayment of other liabilities.
If you decide to re-apply for a loan with a different or the same bank, try to do it this time in order to avoid the rejection of the application. First of all, be careful not to make the following mistakes:
submitting an application when you have debt - first check BIK and pay off any arrears, and then apply for a loan,
incorrectly estimated loan amount - before submitting the application, check your financial capabilities, e.g. using a creditworthiness calculator, thanks to which you will calculate the loan you can afford (you may need to apply for a lower amount this time to increase your chances of receiving financing) ,
providing false information in the application - if the previous application was rejected, e.g. due to low earnings, in the next one, do not enter false information about them, let alone confirm them with a false certificate from the employer, because the bank will verify it and if it detects fraud, it may take You are criminally liable; similarly, do not lower the number of dependents (e.g. the number of children) or hide other repaid loans from the bank that resulted in a negative assessment of creditworthiness in the previous institution,
submitting the application without checking the bank's requirements - each bank specifies the basic conditions for granting a loan, so before submitting the application to another institution, check its requirements regarding, for example, the age at which the borrower should be or the accepted sources of income.
Before you go to the next bank for a loan, analyze the most common reasons for the rejection of the application and try to eliminate them. If this is not possible at the moment, give yourself more time to properly prepare to apply for funding.
People who apply for a mortgage and are not sure if their application will be approved are in the most difficult situation. In their case, there is a fairly high risk of financial losses. An example is the refusal of a mortgage and a down payment - if you sign a preliminary contract with the seller of an apartment and the bank rejects your loan application, you may lose the down payment, because the seller will have the right to keep it due to your failure to meet the terms of the contract. The same problem can be generated by a development contract and a loan refusal.
Therefore, it is worth remembering to conclude a preliminary contract after obtaining a preliminary loan decision from the bank or include a condition in it that allows you to withdraw from the contract without financial consequences if you do not receive a loan.
Remember that if you have any doubts, I am happy to offer you advice and assistance. Let's meet, you will find that my help in choosing the best mortgage can be invaluable.
Feel free to comment. Is the topic of credit analysis interesting for you? Let me know in the comment. Will be happy to help clarify all issues. It is important to me that every topic regarding the mortgage is absolutely explained.
Mortgage broker
Michal Kaplon
os.Stefana Batorego 80
60-687 Poznan
Strona www stworzona w kreatorze WebWave.