Each lender has it’s own application process that needs to be navigated. They all have their own criteria that they use to “knock out” weaker contenders to ensure they abide by the responsible lending legislation. Knowing what punches to look out for and how to move around them avoids you taking a hit. 
Here are some of the main reasons for getting loan rejections:
- Employment Instability
Job stability is a big deciding factor for lenders. They want to see a regular steady income that will be used to repay their money. For PAYG applicants lenders will ask for previous payslips and group certificates as evidence of your income history and for the self employed amongst us the last two years tax returns and financial statements are requested.
A great tip is… you should always consider applying for lending when you are in a stable situation or BEFORE you decide to change jobs or careers.
Don’t panic though if life throws up some curve balls, we have a host of options to get around those lending obstacles.
- Bad credit history and credit score
Lending institutions use a scoring system to help them rate individual borrowers. Every applicant is given a credit score based on their lending, credit and bill paying history. This allows the lenders to knock out the weaker applicants who score poorly based how they have performed so far.
Credit scores usually ranges from 300 to 900, with any score above 750 considered a good credit score. The higher your score the more confident is the lender is that you will be able to repay the loan.
Lenders are now getting more savvy on combining resources to be able to check an applicant’s credit history, so having a history of defaults and credit card areas can trigger loan rejections.
Our tip here is to educate as yourself as young as possible. Understand, what types of behaviour trigger bad credit ratings and position yourself to avoid them. If you have teenagers, teach them how to behave in the financial world they are starting to enter.
But don’t give up just because you have had a bad run, a good broker will always be able to deliver a plan for you to get to where you want to go.
- Bad location
Property valuations are made by lenders to determine the current worth of the property that you aim to buy. If the property is in good condition and is in a recognised and favourable location, it would greatly increase your chance for loan approval at the amount you request. However, always consider the true value of the property based on a current independent market appraisal.
You should always expect lenders to be very conservative when assessing the value of a property that they are lending against as they use this as a means to minimise their exposure to risk.
- Non Servicing
As a borrower, it is important to establish your ability to repay the loan you are applying for. Lenders will ask for evidence of sufficient funds, such as, a history of genuine savings to prove that you can afford the repayments the loan will create.
Lenders want to see that you have excess funds left over from your income after all your expenses have been met. It is these funds that they would anticipate to be used to pay off the loan.
Lenders are guided by the law which states that they must lend money responsibly. This means that they shouldn’t lend you money if the credit is unsuitable for you and there’s a risk of you having difficulties in making the repayments.
5. Not enough for a deposit
Accumulating the deposit required can be difficult. Remember that lenders might feel reluctant to lend more than 80 per cent of the value of the property, so it is important to have access to adequate funds. This is where brokers can help release equity built up in other assets or strategies to be able to use guarantors to help provided the necessary amount required to secure the lending.
We’re in your Corner so here are some Tips to help you get your loan approved.
- Get a copy of your credit report: We can assist you in obtaining your credit scoring.
- Create a budget: direct your money to where it matters most, so you can stay on top of bills and start saving money for future goals. We have dynamic new budgeting technology that makes this a breeze.
- Reduce and reorganise your debts: make extra repayments to reduce your debts or you may consider consolidating them into one affordable loan.
- Seek expert help: you can should ask for the advice of a professional financial planner or broker about strategies that can help you secure approval for you loan application.
Ink Wealth has expert professionals who can assist you in finding the best strategies so you can avoid getting “Knocked out” from your loan applications.
Do you know someone who could use some help in their corner?
Talk to us and we can discuss ways to help achieve financial goals!