In a world where stability is tantamount to owning your own property (house and lot) and a decent car, people rely on loans or bank credit to sustain their lifestyle and needs, especially when their salary cannot pay for what they want immediately.
Prinz Mangtulis of The Philippine Star reported in 2013 a Bangko Sentral ng Pilipinas (BSP) data showing big lenders approved more loan applications with a historical drop to 1.87% of loan rejected in 2013 from 2012’s 2.23%. Although loan application in the Philippines appears to be easier than in other countries, some are still unlucky to get their credit signed by their banks or lenders.
If you’re one of those who recently experienced a denial of loan application, or wanted to avoid experiencing it in the future, here some of the common reasons to avoid for a successful credit application.
Not Providing All Information and Not Answering Calls
Similar to any banking transactions, loan application form is required upon going to the bank. This will carry all your information — from the most personal ones (listing down assets and liabilities) to the common ones (contact numbers). You have to double check that all information are given and provided correctly. Yahoo!’s Mark Aragon said, “inconsistencies in your details, or documents that are missing or look dodgy, can result in a delayed loan application or even an outright decline.” In addition, you must also ensure that the number you’ll provide to the bank is the one you always use. Otherwise, if they try to call you and the number is unreachable, expect them to be uninterested to approve your request.
Negative Financial Record
If you have any bad credit or over limit credit card history, you might need to clear your records first before getting another loan. Every creditor is persistent and serious with back checking potential debtor, and if they found out any negative financial history, they’ll automatically not consider your request for loan. This goes for credit cards, as well. All banks have a credit card database that presents them with all your accounts since the first time you swiped your Master or Visa card. If you voluntarily cancelled a card and paid all debts, then you don’t have to worry about anything. However, for those with cancelled card/s due to inability to pay, this will reflect negatively on your next lender. It’s best to settle all accounts with other banks before jumping into a new one. Note: Too many credit card and loan applications also shows financial instability to most lenders.
Unstable Job History
Another item on the list is the verification and analysis of your employment history. Banks and any big lending companies want to guarantee that you have a stable source of income and have the ability to pay for your loan. Most banks require applicants who have been in the same company for two years or more, as they appear to be more secure financially. Although employment stability is important, some lenders are not strict with the this guideline, so long as the applicant has stayed in the same field of work, they consider it as the same line of employment.
Asking More Than Your Collateral
There are two kinds of loans: ‘secured’ that requires physical item/s (usually house or car as collateral) for backup and ‘unsecured’ requires nothing to be tied to the creditor but requires a higher interest rate (and usually only allow small amount to be loaned). For secured transactions, you need to get the appraise price of the collateral, and the value must be enough to cover your loan amount. However, expect that the lenders will not provide you the exact 100% amount of your collateral as your loan. Thus, consider interest or downpayment, when computing on how much you can loan with your collateral. AmandaLu on HubPages suggested, “using collateral with more value than the amount you are requesting for in the loan is a good way to make up for it.”
The items listed above are some of the top reasons why loan applications are denied. Overall, if you ensure that all your papers and information are legitimate and complete, and avoid the items above, then you don’t have to worry about being rejected. What’s your loan application experience? Share them with us below.