A loan refused by a lender can sometimes be a serious blow to the borrower, especially when the person is very sure of getting the cash. Being educated or knowing why the application was refused will assist to qualify for the loan the next time it’s applied.
Some of the most common reasons for refusal are documents being incomplete, poor credit score, low appraisal, unstable employment and low bank balance.
All documents required by the lender has to be submitted. The loan will be declined if the documentation is incomplete.
Poor Credit Score
The lender can track the credit score to detect the responsibility of the borrower. A poor credit score or maximum borrowing patterns on all accounts maintained results in the application being refused. Even if bills are paid on time, the credit score gives an impression of the type of borrower and plays an important role in the loan application process.
The property valuation is performed by an appraiser appointed by the lender and the appraisal should indicate the property is valued at the purchased price or above for approval of the loan. A loan can be refused if the property is undervalued in the appraisal.
Online loan can be refused if the person is unemployed or does not have a regular income. A person doing business will be required to produce profit and loss statements, tax returns as per time frame required by the lender. If employed, the lender may enquire from the employee the period of employment and other matters relating to the permanency of the job.
Low Bank Balance
Any type of loan needs proof of bank balances and investment accounts. These documents are required especially when the loan is required to purchase a property. Initially, personal money will be required for the down payment and other additional payments. Therefore, the loan can be refused if this criterion is not met.