Getting rejected when you apply for a loan not only affects your future plans, it can also negatively impact your credit score.
The success of your application depends on several factors, such as:
- Your current credit score
- How much you want to borrow
- How much you can afford to repay per month
These will impact what loans you’re eligible for when you decide to apply.
Will I be eligible for a loan?
Your chances of being eligible for a loan depend on your current financial situation. Lenders will take your credit score into account and from that, decide whether to approve your loan application.
There are a wide range of loan products on the market, to suit a variety of circumstances. Not everyone will be eligible for every loan type but finding the right one for you can go a long way to improve your chances of being approved.
What loan am I eligible for?
There’s a lot of choice on the market when it comes to finding the right loan. But without more information on each, you might not get the best deal by shopping around.
Brokers can be a good option for finding a loan you may be accepted for. Taking your current circumstances into consideration, a loan broker can improve your chances of a successful application by acting on your behalf. They also have access to a wider range of lenders and products that may not be available directly.
Of course, this approach doesn’t automatically guarantee success. Sometimes, lenders can deem a borrower too risky based on previous borrowing behaviour or outstanding debts. That said, unsuccessful applications aren’t always down to these factors, but instead stem from applying for a loan product that’s less suitable, or asking to borrow more than your financial history suggests you can afford.
When applying for a loan, it’s important to consider which loan best fits your needs and whether you can comfortably afford the repayments. It’s also worth talking to an advisor, who’ll be able to point you in the right direction.
How do I know if I am eligible for a loan?
You won’t truly know your eligibility for a loan until you submit your application, as it’s only once the lender has all the required information that they’ll be able to decide on your financial situation. However, any unsuccessful application following a hard credit search can negatively affect your credit score, which could make it more difficult to borrow in the short-term.
With that in mind, it’s best to do as much research as you can before making a loan application to get an idea of your own eligibility. Many lenders also allow you to complete a pre-application process, which means they do a soft credit check. While this doesn’t guarantee approval, it will indicate whether you are likely to be approved or not, giving you the chance to decide whether to apply.
What to do if your application for a loan is unsuccessful
When it comes to borrowing, the reality is you may not be successful. If you are unsuccessful in your application, it’s important not to apply elsewhere immediately. A few applications (and refusals) in a short period may negatively affect your credit score, making it even harder to borrow in the future.
If your financial situation allows for it, it can be a good idea to spend a few months improving your overall credit score before reapplying for your loan.
If you are struggling financially, perhaps talk to a debt advisor, who will be best placed to help you with your current situation.
Am I eligible for a loan with bad credit?
If you have bad credit, lenders may deem you too risky and are more likely to refuse your loan application. Certain lenders will offer to loan you money even if you have bad credit, but you may find the conditions and rates aren’t as appealing as they would be with a better credit score.
Ultimately, if you have a poor credit history, you might find it tricky to find a loan that suits you and your budget. Working with a broker can help. They’ll consider your circumstances and credit score when searching for a loan and will often have access to loans that you wouldn’t find by yourself.
How to improve my loan eligibility
There are several ways you can increase your chances for a successful loan application, most of which centre around improving your credit score.
Register to vote
Registering on the electoral roll gives lenders an official proof of address, as well as confirming your identity.
Pay down existing debts
Try and pay down existing debts if you can. Clearing outstanding phone bills, utilities and credit card balances can help improve your overall credit score and shows lenders that you are willing and able to repay debts. Try taking a few months to reduce your current debts and continue paying your bills on time to improve your overall report.
Reduce your borrowing expectations
It may not always be possible to secure the amount you need due to your current financial situation. Consider if it’s feasible to apply for a lower amount and budget accordingly to help achieve your financial goals. By applying to borrow a lower amount, you may have a higher chance of being approved.
Search thoroughly
Loan brokers have access to hundreds of potential lenders and, as such, have a wider search to find you the best products and offers for your financial situation.
Your eligibility for a loan will depend on your current financial situation. Though there are many factors that will determine the success of your application, it’s possible to improve your chances by following a few simple steps.
Find out more about your eligibility and our range of business and personal loans.
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