If a loan request is denied, it can have far-reaching consequences. Of course, there are loans that are not absolutely necessary, such as for a vacation, an automobile or new furniture, but most loans are extremely important to the people involved. These loans mainly include corporate loans that are used to invest in companies and restore them if necessary. In the private sector, loans can help to avoid insolvency and thus escape personal bankruptcy. If one of these important loans is rejected, it can significantly change entire CVs.
Why are some loans rejected?
For banks there are many different reasons to reject loans. The most common reason is lack of collateral. If the applicant does not have collateral, such as investments, it will be very difficult to get high credit. If the applicant also has a fixed-term employment contract or is looking for work, the chances of a loan are scarce. In this case, even small loans become a big hurdle.
Even with a permanent contract, a loan request can be rejected. This is the case when the bank in charge believes that the income is insufficient. For the bank, it must be ensured that the monthly installments are paid in full and on time.
The self-employed usually have a relatively good chance of getting credit approved. It is particularly advantageous if the company is already established. A rule of thumb is that a business or the owner must be in business for three years. After these three years you have very good chances, before this limit it will be difficult to get a loan approved.
Another major reason is exceeding the maximum age. Some banks have set a maximum age limit for certain loan amounts in order to avoid being left in debt in the event of a possible death.
Negative private credit entries and overdraft credits can also help to reject a loan request. In this case, the applicant should first sort and fix the finances with other companies. Then you should submit a new loan request.
Alternatives to a declined loan:
The simplest alternative to a declined loan is the request to another bank. If another credit institution accepts the loan request, you should definitely ask why this is the case. Maybe the conditions are very bad, or the offer is generally very dubious.
Caution is needed in financial transactions. Through test reports or awards you can be sure that the selected bank is serious and fair conditions.
In some cases, you may also ask friends, family or acquaintances for a loan. You have to be aware that money can destroy friendships and you should set exact rules beforehand. Especially with a larger sum, it makes sense to add experts. Under the supervision of a notary or attorney contracts can be closed, which are incontestable.
Thus, both contracting parties are on the safe side. Your own family, friends or acquaintances do not analyze their own behavior as intensively as banks. That’s why there are more chances to get a loan.
Why loan refused?
In the credit industry, there is often a credit rejection as the consumer commonly assumes. Various reasons can lead to it, for example, a negative entry in the private credit, of which the borrower knew nothing. The reasons for this may be the reminder of a collection company, the electricity bill or mobile phone bill were forgotten to transfer on time; the private credit was finally informed. Of course, the negative credit rating leads to rejection in many cases.
The applicant should be aware of any hope of granting a loan before the inquiries are made to the banks.
Requirements for taking out a loan
Not every consumer is able to get a loan at all. Banks require certain premises that must be met in order to apply for a loan at all. The conditions briefly presented:
- The age of majority must be reached
- the borrower must be registered in Germany
- a regular income is required
- high credit sums are usually granted only against collateral
- positive credit rating, so no negative private credit entry
- possible conclusion of a residual debt insurance
The regular income can of course also be the pension, in which case the age of the borrower is respected. For the employee, the focus of banks is on how long the employment relationship is. If this is still in the probationary period, the banks are unwilling to grant a loan. The monthly income must also be above the seizure limit, because in the case of a possibly occurring insolvency of the borrower, the bank reserves the right to initiate a seizure.
The bank checks with the request for the bank statements of the last three months. If a continuously overdrawn credit line emerges, lending is questioned. A guarantor with a positive credit rating is accepted by the banks, so to speak as additional security. If the borrower continuously pays his bills late and waits for reminders, this circumstance can also lead to a rejection.
Small loans and debt-free loans
For small loans, the conditions are of course not as extreme to comply with, such as loans over 10,000 euros and more. The requirements are assessed and required differently by each bank, but the credit rating is checked by each lender. The most important requirements are the positive credit rating and the amount of monthly income.
A loan request without private credit is quite possible, but then the amount of revenue will be in focus. The preparation of a budget also requires some banks. The budget includes the monthly income and fixed expenses such as rent, electricity, living expenses, insurance, payment of old loans.
For example, the borrower has monthly income of 1,500 euros. The following expenses are incurred regularly:
- 550 euros rent
- 150 euros maintenance costs for the car including gasoline
- 100 euros electricity or gas
- 100 euros insurance
- 300 euros mobile and telephone costs
- 250 Euro cost of living
This example will not convince any bank, because the monthly bank rates are to be paid by what? The borrower can not rely on “it will work anyway”. Unfortunately, this logic is incomprehensible to the banks. The monthly income in connection with the fixed expenses should not only include the monthly rate, but even a small buffer for sudden financial shortages.
The prospects for getting a loan are not very positive, and some advice can be helpful to one or the other borrower.
If it is possible to find a business partner, a guarantor with a good credit rating in the circle of acquaintances or a self-employed person, then ask them immediately. Many banks rate a guarantor as a security, because if necessary, the guarantor will of course be asked to settle the installments. If the spouse has a regular income without a negative private credit entry, this can be considered as guarantor or even co-applicant.
The guarantor must, however, be clear that he must take the repayment if the applicant can no longer pay. Unemployment, personal bankruptcy, necessary urgent purchases are enough reasons that the installments can not be paid, and the guarantor has to step in.
Return debits, bookings by debt collection agencies or an overdrawn credit line, as shown in the bank statements, can reduce the chances of a loan being granted. The recommendation to honestly indicate the open items should be followed. These include leases, credit lines and “old loans.” The older loans can be included in the new loan for the purpose of rescheduling.
Open invoices, current loans are gladly forgotten in the self-information for the bank. A recommendation is to obtain from the private credit your own self- information to control the stored data.
Good to know:
Once a year the consumer can demand this self-disclosure from the private credit, this is stipulated by law. The cancellation or correction of incorrect data may be required by the consumer.
The variety of credit cards are indeed convenient and positive for the user. The private credit and partly also banks regard this circumstance as negative. Credit card accounts must also be paid monthly. The prospective borrower should forgo multiple credit cards with the associated accounts and delete them. Important is the checking account. Term money or term money accounts have no influence on the assessment of creditworthiness.
The EC card is sufficient for cashless purchases, credit cards seduce you to shop in the city or online. The credits of the credit card accounts must also be stated when making a credit request, thus worsening the budget.
Name the loan request correctly. This means that the applicant declares this as a request for a request. Any queries from the banks at the private credit worsen the information. Many consumers ask at several banks and each bank issues a credit check. The private credit registers the regular query, so many requests lead to a negative assessment. However, the condition inquiry is not stored with the private credit.
Many banks automatically ask for the neutral condition query, but this is not a must, so the claimant should point out, otherwise waive the request, if several banks are interesting for the customer. It takes months until various bank inquiries from private credit storage disappear.
The reason that the loan was not granted may be due to low income. This should be above the seizure limit. However, there are banks, notably online, that handle credit applications significantly more flexibly. The borrower should again check the loan amount, sometimes enough less and make a new application to another direct bank. The loan calculator is an essential help to make accurate calculations to calculate a realistic repayment of the loan.
Contacting customer support is helpful in obtaining alternatives that will result in a positive credit decision, even with a smaller loan volume. At this point it must be pointed out again that desperate credit applicants should not get in touch with dubious providers.
If the bank does not accept even the smaller loan, a reputable Swiss bank without private credit information usually remains as a last resort.