What to Do if Your Loan Application Is Denied
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6 reasons your loan application was denied and what to do next
1. Your credit score is too low
- Getting a secured credit card and making on-time payments.
- Getting a credit-builder loan and making on-time payments.
- Becoming an authorized user on a credit card of someone with a strong payment history.
2. Your income is too low
3. Your debt-to-income ratio is too high
4. You do not meet lender requirements
- Be a U.S. citizen or permanent resident.
- Have a Social Security number or, in some cases, an individual taxpayer identification number.
- Live in a state where the lender provides personal loans.
- Be at least 18 years old.
- Have a valid email address.
5. Incorrect information on your application
6. You requested too much money
3 ways to improve your chances of personal loan approval
1. Pre-qualify
2. Add a co-signer or co-borrower
3. Secure the loan with collateral
How long to wait before reapplying for a personal loan
Alternatives to personal loans
- Buy now, pay later: Many major retailers partner with “buy now, pay later” companies that allow you to split up a large purchase over several weeks, usually without interest or fees. This type of financing typically doesn’t impact your credit score.
- Cash advance app: Borrow from your next paycheck with a cash advance app. Borrowing amounts are relatively low, but you can pay an express funding fee to get the money instantly. Some cash advance apps have a subscription fee or ask for an optional tip. Payments are usually due by your next payday.
- 401(k) loan: A 401(k) loan lets you borrow from your retirement account. Interest rates are low and there is no credit check, but borrowing from your nest egg reduces its growth potential over time, and you may face penalty fees if you leave your job before you’ve repaid the loan.
- Family loan: Borrowing from family eliminates credit checks and high interest rates, but your relationship can be strained if the money isn’t repaid on time. Sign and notarize a loan agreement to eliminate any confusion about the repayment plan.
- Local financial assistance programs: A charity or nonprofit in your area may offer assistance with basic needs such as housing, transportation or utility bills. Some organizations even provide low-interest loans to people in need. Use this list of local financial assistance programs to find resources near you.
- Pawnshop loan: You can get a pawnshop loan using an item you own as collateral. The amount you can get will depend on the assessed value of the collateral, but you can get money instantly without a credit check. Be aware of high interest rates and fees and quick repayment terms. If you don’t repay the loan on time, you’ll lose your collateral.
How do I find out why my loan application was rejected?
What credit score do you need for a personal loan?
Does getting rejected for a personal loan hurt your credit score?
Article sources
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