Applying for finance is a major worry for many people and the reason it causes such worry is that it’s difficult to know in advance whether a lender is going to say “yes” to your application or not. You might be surprised to hear that it is actually quite straight forward and that, by using a well-connected and respected broker like Loan Princess, you can better balance the odds of getting that all-important “yes” in your favour.
In this article, we’ll look at the six main reasons why you might be getting turned down for loans and those reasons are:
• a poor or limited credit history,
• mistakes on your credit file,
• why you want to borrow the money,
• why your “disposable income” is important,
• entering your details wrongly onto an application form, and
• your employment history.
At the end of this article, we’ll explain just what Loan Princess does and how we can help you find the loan you want.
Poor credit history or limited credit history
Let’s be clear about one thing – your credit history and credit score is just one factor behind why a lender will say “yes” or “no” to your application. It is an important reason but just as important in many ways are the details you fill in on your application form and the lender’s own “borrower profile”. Please let us explain…
Your credit score is based upon what’s on your credit report. Your credit report is like a constantly updated scoreboard containing information about:
• whether you are making payments on time and in full (to finance companies and other companies like your gas and electricity supplier and Sky),
• how many credit accounts you have open right now,
• how much credit you’re actually using across all the accounts you have open,
• your address history, and
• much more.
Your credit report is a big, hefty file and it gives loan companies an idea of how good you are with your money. There are two problems though and they are:
• if you have had a lot of credit in the past and missed a few repayments, that means that, in many cases, you’ll have a bad credit history
• if you’re young, you won’t have that much information on your credit account because you’ve not had the chance to take out finance or set up accounts with utility companies and so on.
If you have a bad credit rating or not that much information on your credit file then that is a problem but it’s not an insurmountable one. There are many lenders out there who are happy to work with borrowers who have a poor credit rating or whose credit reports do not contain that much information – the key is to find those lenders whose “borrower profile” you closely match (more on that later).
Remember to always check your credit file
According to the latest statistics, there are millions of credit files for Brits which contain basic errors and these basic errors could be standing between you and the loan you want.
You can request a copy of your report from each of the three main agencies – Equifax, Experian, and CallCredit. As soon as you can, order them and go through each one of them with a fine toothcomb. Send separate letters to each of the credit agencies explaining in detail the errors you have found and ask them to expunge them from your record. This process can take a month from start to finish but it’s well worth it and the Loan Princess team strongly recommend that you do this straight away.
Lenders don’t like the reason why you want to borrow money from them
Many lenders, particularly some payday loan companies and short-term loan companies, don’t like it when borrowers want to take out loans for certain reasons – particularly to invest in a business or to invest in stocks and shares.
You should always be honest with your lender about the reason you want the money but you should make sure that you only apply to lenders happy to approve loans for the reasons you want the money.
You don’t have enough money left over at the end of the month
Under current UK credit legislation, every lender is obliged to carry out an affordability assessment on everyone who applies for a loan. While what’s on your credit report is important, the information you provide a lender with about your current financial situation is in many ways just as important.
You’ll be asked about the money you receive into your household – that includes your wages and any benefits you receive. You’ll then be asked to fill in details of how you spend your money every month, for example, your mortgage or rent costs, entertainment costs, clothing costs, childcare costs, and so on. The difference between what you receive and what you spend is your disposable income.
When assessing affordability, lenders will look at the size of your disposable income and compare it with the size of repayments on the loan you want to take out. If you’re still left with a bit of money from your disposable income once your loan repayment has been taken out, you’re more likely to get a “yes” from your lender.
The details you entered onto the application form were wrong
Many of the loans that are turned down by lenders are turned down because, when someone makes an application, they make mistakes on the form. Even little mistakes can make a big difference in your chances of being accepted.
Please thoroughly check everything you’ve included on your application form before you press the “send” button.
Your employment history
Lenders like to see a stable history of employment or self-employment when you make an application for a loan. Some lenders might want to know your employment history for the last three years and, if you switch from job to job, that might put them off the idea of saying “yes” to your application.
However, it’s important to point out that there are other lenders who are more interested in the fact that you’ve been employed over a longer period of time, even if it’s with a number of different companies. This demonstrates to them that, even if a job you’re doing comes to an end, you are motivated enough to find yourself another job quickly. For them, this makes you less of a risk and a good bet.
Fighting back with Loan Princess – the bad credit broker spec
It’s easy to think that all lenders are the same as each other. The truth couldn’t be much further from that because one lender might say “yes” straight away to your application and another might say “no” because there’s just one little thing on your application that they don’t like.
That’s where Loan Princess comes in to help both borrowers and lenders. We know that borrowers want the best deal and they want it in a hurry. We know that lenders want the most suitable borrower applications sent to them because they’ve got the best chance of getting their money back. We’re here to engineer a “win-win” situation for everyone.
Loan Princess works with dozens of different lenders across the UK, all approved and licensed by the Financial Conduct Authority. We’re not a lender ourselves – we’re a broker. What we do is examine both the details on your application form and your credit report and then we match your application to the “borrower profiles” we have on record from each of our partner lenders. The ones whose borrower profile you match the most closely are the ones to which we submit your application.
It sounds long and complicated but, in partnership with the lenders, we’ve automated the process meaning that you get your answers and offer back within seconds. When you receive your offer assuming you’re accepted, you see all the crucial details you need to know about whether the loan is right for you including information on interest rates, the overall cost of the loan, and the size of your monthly repayments.
Our service is free of charge and you’re under no obligation to accept any quote we give you. If you want to proceed having satisfied yourself that this is a loan you’re certain you can comfortably repay, sign the online form and, dependent on the lender and who you bank with, your money could be with you in under an hour.
To start your application, please click here.