If you have just applied for a loan expecting to be approved, a decline can come as quite a shock. You have always paid your bills on time (..well..almost..), you are employed on a good steady income. Aren't you the perfect candidate for a loan? What are the lender's concerns ?
The following article will provide some background as to the reasons why a lender may decline your loan application:
Most of the reasons can be addressed either in the short or medium term.
Have you considered a Secured Loan
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If you have applied for an unsecured personal loan, you application may be perceived a risky. In some circumstances offering the lender some security will reverse their decision. If you are looking to buy a car and have been declined a Personal Loan because of credit history problems, you may find that you will be able to qualify for a secured car loan.
Likewise if you are looking for a personal loan to finance an overseas holiday, you may find lenders reluctant to approve unless you are a property owner. If you do not own any real-estate, consider someone who does, going as a guarantor on your personal loan.
Insufficient Deposit
No deposit - No problems. How many times have we been told that by lenders. So why is it when you apply for a home loan without a deposit you may be declined.
The answer is quite simple. While some home loans do not require the borrower to have a deposit - this does not apply to all loans offered by the lender.
No deposit loans have various qualifying criteria including Australian residency, stable income, clean credit etc. If you do not have some or all of these then you still can qualify for a home loan but some deposit will be essential.
Inadequate income to service the loan
Each and every lender have their own Mortgage Calculator which is used to determine whether you are able to service the loan you have applied for. If you did not qualify with one lender it does not mean that you will not qualify with any.
One does need to be mindful of your employment status at the time of your loan application. Maternity Leave, extended sick leave of short term disability leave will have an impact on the success of your application. It is best to apply when employed and with full financials on hand. But if this is not possible you may wish to look at the Low Doc or No Doc loans.
Have you Considered the Low Doc or No Doc Loans
Low Doc and No Doc loans are great for people who are self employed, retired, or are simply independently wealthy. If you do not wish to provide all your financials or have not had the chance to complete these in time for your loan application - Low Doc and No Doc loans are a great alternative.
Your loan cost may be slightly higher as it factors in the additional risk of unavailable financials - however qualifying for such a loan should be easier.
Unacceptable security property
Another reason that lenders may decline a home loan application is the security property on offer. Many lenders will only offer mortgages in certain post codes and have requirements regarding the minimum size and proposed use of the property.
Some examples of difficult securities to finance are : Hospitals; Childcare centres; petrol stations; serviced apartments; hotels; studio apartments under 50 square meters. Large blocks of farming land etc.
Often the difference between an approved and a declined application with these securities is the amount of deposit on offer. The larger the deposit the greater the chance for approval.
Bad Credit History
When was the last time that you checked your credit history. It is quick , easy and free. Baycorp Advantage will make a free credit report available to you reflecting your credit history. If you have been declined for a loan this should be the first place that you check.
Should you discover an Overdue Account unpaid account on your report - it needs to be paid as soon as possible.
If the account was never yours (you may not recall having an account with that company). Contact the Credit Provider and give them the reference number on your credit file so they can investigate the matter for you. If the credit provider confirms that the account is not yours, they will inform Baycorp Advantage so that the account can be removed from your file.
In Australia, as a rule, unsecured personal loans are not available to persons with a bad credit history unless defaults are small and for utilities (not credit cards or other loans).
With Home Loans a bad credit history is generally not a problem - however certain restrictions do apply. There are a number of sub-prime lenders that can assist you to obtain a Bad Credit home loan. Many of these products are now offered at rates very close to rates offered on good credit mortgages. However the applicant will need to have some deposit. Generally at least 10-15% deposit is required.
Status of Loan Applicant
If you are an overseas resident, unemployed at the time of the application, a retiree, under 18, or Bankrupt at the time of the loan application - you may not qualify for the loan you are applying. These circumstances are unusual and the applicant will only be considered for certain loans and with a small number of lenders. If you have applied but were declined - do not worry. Contact a mortgage broker that you trust and see what happens. In many cases just packaging the loan application correctly will make the difference between the loan being approved or declined.
If you would like to learn more about loans available to Australian borrowers and the different criteria and options surrounding such loans please visit
www.webdeal.com.au or www.honeyloans.com.au
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