With a file that is deemed acceptable, it is entirely possible to be refused a personal loan by a banking establishment. And even if each lender follows their own rules for granting credit, it is clear that it is often the same reasons that motivate a negative decision. Here are the 5 most common reasons for refusing a personal loan.
Low credit rating or lack of history
In conventional banking institutions, a low credit score almost always leads to a loan refusal, when the borrower has sufficient income and is low in debt. As the lack of history also translates into a low credit rating, newcomers to the credit market are also generally refused their loan for this reason. In this case, the only solution available to the borrower is to apply for a loan without investigation in order to have a chance of obtaining financing.
Too low income
Even if you have no debt, it will be difficult to get a loan if you have a low income, for example because you work part time. Indeed, as a general rule, credit institutions and in particular those granting loans without investigation require a minimum income of $ 1,200 monthly.
Too much debt
Even if you have a comfortable income, the lender can refuse you a personal loan if he judges that with this new commitment, your debt may be too high. Generally, banking institutions consider that the debt ratio should be between 32 and 40% of total annual income. In case of refusal for this reason, the only solution is to wait to be able to settle certain loans, preferably those with the highest interest rates, in order to reduce its debt ratio and thus be able to reapply for a personal loan. And even if you have a low debt ratio, a lender can also refuse you a personal loan if he finds on the bank statements that you are paying back a micro loan or a payday loan. It is therefore better to pay it off before applying for a personal loan.
A history of arrears
When a credit institution studies a client’s file, it carefully examines the latest bank account statements. This is how he can check the amount of income received and the credits being reimbursed. But it is also also for him the means of detecting if the borrower has had arrears for the past three months. An incident of this type generally pushes traditional banking institutions to refuse a request for a personal loan. Some lenders who grant loans without investigation can tolerate a default on the period provided that besides that, the borrower’s record is good.
A recent change of employer or accommodation
If you have been in the business for less than six months, if you have moved within the last three months, or if your checking account has been open for less than 90 days, you risk being refused a personal loan by the employer. banking establishment with which you deposit your request for credit. In order to grant a personal loan, traditional institutions such as private lenders generally require six months’ advance notice from the employer and the residence address, as well as a check account opened for more than three months in an agency of the Quebec.
Lenders do not just stop at the amount of income received to make a personal loan. They can indeed refuse the borrower’s request for other reasons and in particular if his credit rating is low, his debt high, that his history shows recent unpaid, or that his seniority in the business or at home is insufficient.