Did you know that the average Canadian credit score is 649? This is considered a fair rating, but what if you are below that?
You might end up with a loan denial that can really halt your access to funds and getting ahead in life. Was your recent loan denied and you are left wondering why?
In this article, we will discuss some of the common reasons for loan denial for short-term financing! We will also look at some alternative options. Let’s get started!
Common Reasons for Loan Denial
One of the biggest reasons for loan denial is having a poor credit score. Lenders want to see that you have a history of responsible borrowing and making payments on time.
If you have a low credit score, it may indicate to the lender that you are a higher-risk borrower and may not be able to repay the loan. This can result in a loan denial.
Insufficient Income or Employment History
If you don’t have a stable source of income or a long enough employment history, lenders may be hesitant to approve your loan. They want to see that you have the means to repay the loan and a steady job or income source is a good indicator of that.
If you have a short employment history or low income, it can be difficult to get approved for a loan.
High Debt-to-Income Ratio
Another factor that lenders consider when deciding whether to approve a loan is your debt-to-income ratio. This is the amount of debt you have compared to your income.
If you have a lot of debt and a low income, lenders may be concerned that you won’t be able to make your loan payments in addition to your other financial obligations.
Lack of Collateral
Some loans require collateral, such as a car or home, to secure the loan.
If you don’t have anything to offer as collateral, it can be difficult to get approved for a loan. This is because the lender has less assurance that they will be able to recoup their investment if you default on the loan.
Recent Bankruptcy or Foreclosure
If you have recently gone through bankruptcy or foreclosure, it can be tough to get approved for a loan. These events indicate that you have had financial difficulties in the past and lenders may be wary of lending to you again.
They want to see that you have taken steps to improve your financial situation before they approve a loan.
How to Improve Your Small Loan Approval
Improving your credit score is one of the best ways to increase your chances of loan approval. Start by reviewing your credit report for errors and dispute any inaccuracies.
Then, focus on paying down debt and making all of your payments on time. This will show lenders that you are a responsible borrower and will help improve your credit score over time.
Provide Collateral
If you’re having trouble getting approved for a loan, offering collateral can increase your chances. Collateral is something of value that the lender can seize if you default on the loan. This can be a:
- Car
- Home
- Savings
By offering collateral, you are giving the lender more assurance that they will be able to recoup their investment if you are unable to repay the loan.
Show Proof of Income
Lenders want to see that you have a stable source of income and a good employment history. This indicates that you have the means to repay the loan.
To improve your chances of approval, bring proof of income and employment, such as pay stubs or a letter from your employer, to the loan application process.
Reduce Debt-to-Income Ratio
Reducing your debt-to-income ratio is another way to improve your chances of loan approval. This involves paying down debt and increasing your income.
The lower your debt-to-income ratio, the more attractive you will look to lenders. They will see that you have a good handle on your finances and that you are more likely to be able to repay the loan.
Work with a Co-Signer
If you are having trouble getting approved for a loan, working with a co-signer can help.
A co-signer is someone who agrees to repay the loan if you are unable to do so. This person should have a good credit score and a stable source of income.
By adding a co-signer to the loan application, you are giving the lender more assurance that the loan will be repaid, which can increase your chances of approval.
Alternative Options with Kingcash.ca
No-credit-check loans and fast-cash loans are loan options that, as the name suggests, don’t require a credit check. This can make them appealing to people who have poor credit or who don’t want to have their credit score impacted by a loan inquiry.
Fast-cash loans, also known as payday loans, are designed to provide quick cash to borrowers in an emergency. They’re usually due on the borrower’s next payday and are intended to be a short-term solution to a financial problem.
No-credit-check loans are similar to fast-cash loans in that they don’t require a credit check, but they may have a longer repayment term and lower interest rates.
At King Cash, we offer online loans to those who need a small loan fast. Take a look at our application requirements and see if you qualify for a short-term loan.
Loan Denied? Turn to Kingcash.ca
Was your loan denied? Don’t worry, we have your back. Whether you’re dealing with an unexpected expense or just need a little extra cash to get by, it’s important to carefully consider your options.
Apply today for an online loan and get results quickly!
