The Man From The Bank Says No
With budgets tight, many people are avoiding taking on further debts. The decision to take out a loan is never easy but if you have decided it is the only option to fund an important purchase, finding the right loan is essential. Banks and lenders have also become more ‘wary’ in their lending patterns in recent years, so what happens when you take the plunge, apply and then get turned down? It can seem like the end of the world – especially if the loan is for an important or essential purpose – but there are ways to find a solution.
Mistaken Identity and Misinformation
If you’ve applied to your bank and been turned down for a loan the first thing is not to panic! Lending criteria is far stricter than it was until the credit crunch, and the refusal may be due to a slight ‘blemish’ on your credit record. The first thing to do is check with the bank as to why the loan was refused; it may be that the blemish in question is not accurate and you can apply to have changes made to your credit file if this is the case. Keep in contact with your bank and see if they are willing to reconsider your application if this is the case.
Additional Security Measures
If you’ve applied for an unsecured loan, and this has been refused, it may be worth talking to the bank about a secured loan. Homeowners may be able to borrow from the equity in their property and the bank may be more willing to offer this type of loan, as it offers them a more security for the loan itself. The advantages to a secured loan on your property are mainly that the loan will potentially be for a longer period, and the interest rates (and hence payments) may be lower and more manageable. There is, of course, one big warning to be aware of in this case – loans secured against your home can lead to repossession if you cannot keep up repayments. Banks and other lenders are also much quicker to act, in the current financial climate, if you don’t keep up repayments. Taking out a secured loan should not be Plan A, B or even C, but if it’s necessary consider the implications carefully before doing so.
The purpose of the loan may make a difference when it comes to looking for other sources of funding. For those with less than perfect credit histories there are a number of lenders prepared to offer a small or shorter term loan. These nearly always come with much higher interest rates and this means that you need to be sure that you can afford the repayments. A small, unsecured loan taken out for a short period, including the pay day variety, can help you through difficult times, but should only be used if you are certain that you can pay back the full amount by the agreed date.
Give me Credit
If you have an existing credit card there is always the option to take the cash out from this card. Interest rates on credit card cash balances are high, compared to a personal loan and a loan secured on property. However, they are often much lower than rates on short term or pay day loans and this can mean that using the credit card to fund the emergency purchase, may be an option. Again, it’s important to be sure you can pay back the amount borrowed and avoid missing payments (which will negatively affect your credit score and the possibility of getting credit in the future). If possible, consider transferring to a new provider to take advantage of an interest free period, once you’ve borrowed the extra cash!
William Bancs has blogged and blogged about finance and what can happen when money is short. Being turned down for loans is not as uncommon as it once was – however there are a number of alternatives for funding those essential purchases.