The fact that a loan is rejected can have both rational and subjective reasons (see Loan conditions ). Here it is necessary to revise his own application again from a rational point of view.
The rejection of a loan application does not mean that there are no financial backers for your own project.
The search then turns out to be just a bit more involved.
All facts about the guide “Credit rejected” at a glance:
- The amount of the loan amount depends on the current – and sometimes on the expected income.
- The length of maturity must be met by borrowers and lenders
- Creative ideas are better financed through personal loans.
- private credit bureau assesses the payment history of the past
- Guarantee, employer and personal loans as an alternative to bank credit
But what possibilities exist for a rejection of the loan? Our adviser on credit rejected reveals it!
1. The amount of the loan amount
First and foremost, the lender deals with the objectively comprehensible factors of a loan. These are the rationally easy to understand facts, such as the question of whether the loan amount is in a positive relation to the realizable income. Simply put, is it possible that the current income can be used to finance a loan in the desired amount?
Of course, younger people in particular are also considering their opportunities for advancement. Utopian salary expectations, however, are not expected here. Depending on the industry, salary scales can be consulted.
If the borrowers are in a collectively regulated industry or in the public sector, it is relatively easy to expect the next highest salary level, or at least the second higher salary level.
Salary classes that are linked to the age of the borrowers, of course, make calculations in this direction much easier.
For sectors that are not governed by collective agreements, it may happen that only the current income is included in the credit calculation. This may initially upset the borrower, but is essentially for his own benefit. In the end, none of the involved parties are helped if the borrower comes in financial difficulties. As a result, lenders also have an increased interest in keeping the loan amount within a realistic framework.
If the borrower becomes insolvent, insolvency proceedings are opened and the financial situation is scrutinized. If the liquidator and the court come to the conclusion that the loan was granted too high from the outset, it may even happen that the lender can no longer claim payment.
In summary, it can be stated that the amount of the loan must fit the income situation of the borrower. If necessary, promotion potentials can still be taken into account. However, these bills are to be treated with care on both sides. Therefore, an optimistic credit line is a reason to reject loans.
2. Credit Term: Longer is not always better!
However, it may well be that the credit line is in principle appropriate for the borrower, but the desired duration does not correspond to the expectations of the lender (also read: same-day loan ). This can be the case for two reasons and lead to the rejection of the loan application. On the one hand, disproportionately long terms and, on the other hand, exceeding certain life-stage limits.
Disproportionately long maturities can lead to a rejection in that the lenders make the money available for the agreed period and can not work with it during this time. The one big investment, such as a house with high volume of credit needing a longer period of time to pay off is out of the question. However, smaller loan volumes should also be paid off in the medium term. This is already common sense.
If a loan of € 10,000 is required for a car purchase, the installments should not be discounted for a period of 15 years. Experience has shown that in the meantime another car purchase would be due, for which then a new loan would have to be taken.
In this respect, the credit line and term must be coordinated. Otherwise, borrowers will eventually run into a debt trap that is neither in the interest of the lender nor in the interests of the borrower.
Apprentices or employees on fixed-term contracts can only plan their installments safely until the end of the employment relationship. Accordingly, lenders are also reluctant to lend to individuals in these circumstances. Another factor is the entry into the pension. Long-term planning becomes a risk to banks as they grow older. Here there is the possibility to conclude credit life insurance. In principle, however, borrowers are initially creditworthy only as long as they receive a regular income.
3. Creativity alone does not justify credit
The need to claim a loan does not always arise from generally understandable motives. While house building, renovation and car buying are still among the existential motives, beauty surgeries, luxury vacations or ideas for start-ups are to be regarded as subjectively interpretable.
Certainly, nothing speaks against a loan, which is repaid within a very short time with a given income. As a matter of fact, it does not matter to the lender whether the money was invested in cosmetic surgery or luxury holidays. Rein Rational does not speak against a credit rating and the credit is approved.
But who decides on start-ups with innovative ideas about the granting of loans? Do the bank accountant’s imagination and the borrower’s persuasiveness count alone?
It can not be generalized at this point. It is certainly true that more innovative ideas that require a certain amount of courage are not necessarily supported by traditional banks in the form of loans. The likelihood that this loan will be denied is relatively large. If a corresponding business plan with well-researched market analyzes is presented, the chances of a positive response naturally increase. Nevertheless, one should not approach the banks with too much hope.
Start-ups of a down-to-earth industry can count on more encouragement at this point and, if necessary, receive support from the Chamber of Crafts or the Chamber of Commerce and Industry – depending on the sector. You will find more information on the subject in the guidebook: “Credit for founders: How to approach your dream!”. At least the purpose of the loan can also be a reason for rejecting a loan agreement.
4. Negative private credit bureau entries as rejection reason
For the rational reasons to reject a loan, however, counts a negative private credit bureau entry. private credit bureau has existed since 1927 and has been collecting all data on the payment behavior of credit customers ever since. If the customer permanently delays payment of invoices or installments, this will result in negative private credit bureau entries. Of course, an unpaid bill will not jeopardize a complete home loan. At this point, the borrower still has the right to explain himself or, if necessary, have the entries corrected.
However, tendencies can be recognized. Applicants who regularly default on their payments will find it difficult to get credit approved. Nevertheless, the decision is at the discretion of the lender.
In most cases, the applicant is asked to enclose private credit bureau self-explanations with the application forms. Otherwise, a declaration of consent must be enclosed that the lender is entitled to obtain the private credit bureau data. A denial of authorization makes no sense at this point.
Exactly how a self-assessment is sought and what a private credit bureau scoring procedure is exactly, you will find in the guidebooks “How does the private credit bureau scoring procedure?” And “The private credit bureau self-disclosure pattern: how to find out their status!”.
5. These three alternatives exist
If the loan application is rejected by a bank, there are alternatives.
- Loan with guarantor
- Private lenders
- Credit from the employer
All these alternatives have their advantages and disadvantages. The biggest disadvantage is the renunciation of the “neutral independent”. Whether a guarantor is used, the employer or a private donor to facilitate the loan – it creates a dependency on someone from his social environment.
True to the motto “money destroys friendships”, such a loan or guarantee can lead to a break. Not everyone can live well with the responsibility for someone else or the feeling of being in debt to someone.
Therefore, the potential debtor should think twice about this step. Even private financiers, who previously had no emotional relationship with the borrower, can suddenly demand a say. Such things should be taken as a precautionary contract to avoid inconvenience.
For more information on each of the alternatives, see the guidebooks: “Loan with guarantor: A popular but risky funding”, “Private lender: Last chance or better terms?” ( Credit terms ) and “Credit from the employer: The boss, their creditor and sponsors “.
6. The conclusion: A rejected loan is not the end of a dream
Of course, rejecting a loan can lead to frustration. The reasons mentioned above may be as accurate as, for example, a non-publicized credit lock on the requested bank. Therefore one should not be discouraged by a refusal. Only when one cancellation after another on a rainy one should again worry about his credit concept. In the first place above points should be the focus.
Questions such as “Does the amount of the loan to my current income situation fit?” (See credit calculation ) and “Is the rate planning also realistic?” Should be critically questioned again. In the case of business start-ups, the business plan can also be revised with consultants from the employment office or other institutions.