It isn’t a great feeling to find out that your loan application was declined. Especially when you really need the money. But unfortunately, this could happen.
Before you start applying for another loan, it helps to understand why your application was declined. This way, you’ll be able to make small changes that could help get your next application approved.
Common reasons why people are not approved for a loan:
Affordability
Loan assessment takes into consideration the loan amount, your income, liabilities and expenses. If your financial obligations and expenses are too high, lenders may decline your application as this could leave you struggling, financially.
Insufficient or poor credit history
When you apply for a Personal Loan or Line of Credit with us, we’ll make an enquiry on your credit history. This helps us understand your creditworthiness and suitability for a loan.
There are many reasons that may negatively impact your credit history including payment defaults and dishonours, missed repayments on your loans or utility bills, and number of times you attempt to borrow – just to name a few.
It’s worth to get hold of your free credit score and report to understand your credit history. For tips on how to improve your credit score, visit here.
Too much debt
When assessing your application, we look at the percentage of your income that will go towards paying off your existing debt (also known as your debt-to-income ratio). If you have too much existing debt, your application may have been declined as you can’t afford to take on more debt.
Irregular income and employment
Being financially stable gives lenders comfort that you’re able to pay back your repayments when they’re due. If you’re always changing jobs and don’t have a stable income, you may not be able to make your minimum repayments by law.
While we loan to customers who receives Centrelink payments, this cannot be more than 50% of your total income.
When can I re-apply?
Generally, if you have unclear dishonours and defaults on your credit file, its best to wait for 30 days before you re-apply for another loan.
If your work and income has been unstable and you’ve been able to secure a stable job with a regular income, you could re-apply after 14 days.
Tips to improve your chance of approval:
1. Triple check your loan eligibility before applying
To be eligible for a Credit24 loan you must:
- Be an Australian Citizen or a Permanent Resident
- Be aged 18 years or over
- Be employed and money paid into your bank account
- Have a reasonable credit history
- Earn at least $1,000 in a month
2. Check your credit score
We’ve put together a guide with everything you need to know about your credit score and how to improve it.
3. Know your numbers
It sounds trivial, but make sure you know how much money you can borrow and what monthly repayments you can afford.
4. Pay your bills on time and keep your debt low
Remembering to pay your bills on time is a good indication that you’ll be able to make your loan repayments regularly. Reducing your debt, such as loans and credit cards, as much as possible could also help when applying for more credit.
While there is no guarantee that your next loan application will be approved, taking these simple steps to improve your financial situation could help.