Being told that your personal loan application was denied hurts and can cause a slew of emotions including worry, dread and anger. But all is not lost. In fact, having your loan application denied can actually be a good thing. Here’s what to do in the aftermath.
Learn Why you Were Denied
According to What to do After Being Denied a Personal Loan, one of the first actions you should take is research why your loan was denied. The lender should send you a letter stating the reasons why the application was rejected. Review this letter closely and follow up on any reasons that are listed.
For example, the letter may state that your application was rejected because of high amount of outstanding debts. But, if you don’t currently have much debt, this could be a red flag that someone has stolen your identity and is accumulating debts in your name. If you have, indeed, accumulated a significant amount of debt, meet with a debt specialist to learn how you can more quickly begin repaying that debt.
Review Your Credit Report
Review your credit report after your personal loan application is denied. Your current credit score will provide much insight into how you’re viewed by lenders. For example, if your credit score is borderline or low, lenders will see you as a risky applicant and will be much less likely to lend you money. While learning that you have a low credit score may cause stress, it’s an important step in recognizing that you need to improve your financial situation.
Improve Your Credit Score
After you know your credit score, you can take action to improve it. A few factors that impact credit scores include debt to credit ratios and timeliness of bill payment. So, if your credit cards are close to being maxed out and you’ve been forgetting to pay some bills, these are prime opportunities to improve your credit score. Begin paying down the balances on your credit cards (every little bit helps) and sign up for bill auto pays to avoid making late payments.
Wait to Apply for Another Loan
While you may be tempted to immediately apply for another personal loan with a different lender, resist this urge. Each loan application can ding your credit score, which means you should space out applications for things like credit cards and personal loans. Also, if one lender already denied your loan application, chances are high that the same will happen with a different lender. Wait to apply for another loan until you’ve taken the necessary steps to pay down your current debt and improve your credit score.
All will not be lost if your personal loan is denied. A loan rejection can actually be an opportunity to review your credit score and take action to improve your financial situation. Rather than viewing the rejection as defeat, view this as an opportunity to take control of your finances.