Receiving the news that your loan application has been rejected is hard to stomach. It can throw your best-laid plans up in the air and will require you to reconsider the situation. But it’s important to realise that being rejected for a loan is not the end of the world. To ensure you don’t lose focus on your goals, we offer our tips on how to deal with a loan rejection.
Experiencing rejection from a bank, building society, or another lender can be demoralising. But it’s so important not to panic. One of the worst things you can do after being rejected for a loan is to start applying to every lender you come across. If you apply multiple times for loans in a short period of time and are rejected, your credit score will be affected as a result. This will harm your long term chances of receiving a loan.
Also, it’s really important not to apply for a payday loan. While readily available, payday loans come with huge interest rates – sometimes upwards of 1000% APR – and can leave you in a tough financial situation. They also don’t help your credit score, which is another reason to avoid them.
Research the market and look for other lenders
Upon receiving your rejection, take some time to research the market before firing off a new application. There are lots of reasons why you might have been rejected for credit, and there are plenty more lenders out there. If you initially applied with a bank, look for other types of lenders and consider the terms and conditions of their offers.
A good place to begin is with Money Saving Expert’s eligibility calculator, which protects your credit file while giving you a good idea of your chances of being accepted. When you’ve taken stock of the market and considered various options, you can then set about making another application based upon the new information.
Consider alternative lines of credit
As you’re probably aware, there are multiple ways of receiving money and you’re not confined to a single approach. While you may have been rejected for a loan, you might be approved for a credit card, for instance. Equally, if you’re planning to make a purchase, you might be able to finance it with a buy now, pay later arrangement.
Further still, you might even consider approaching your friends or family to ask them about providing you with a loan. If you take this approach, it’s important to outline the arrangement in detail and to weigh up the pros and cons of borrowing from a loved one.
Rebuild your credit score and re-apply
If you think your loan application was rejected because of your history, spending some time improving your credit score is a smart move. After all, traditional lenders make their decisions based upon your credit history above all else, so it’s important to take steps to improve the way you’re viewed by potential lenders in the future.
Simple things like registering on the electoral roll, making regular payments on time, and checking for errors on your credit report can all help your score. While you can’t build your credit score overnight, putting in the time and effort to do so will undoubtedly be worth it in the long run.
How Koyo Loans could help you
Traditional lenders like banks and building societies base their loan approval decisions primarily on your credit score. At Koyo Loans, we utilise Open Banking technology to get a much broader picture of your current financial situation. This enables us to make our decisions based upon real and accurate financial information, rather than what a third party says about you. 24.9% APR Representative.
We offer personal loans of between £1,500 and £12,000 that are simple to apply for and the money is usually in your account within 48 hours. 24.9% APR Representative.