A personal loan is a flexible tool you can use to cover various expenses, like a medical bill, car repair, or home improvement project. In a perfect world, you’d apply for a personal loan and get approved without any issues. If this doesn’t happen, however, don’t worry. Personal loan denials are quite common, and there are steps you can take to increase your chances of approval and obtain the financing you need.
Speak to the lender
If you’re unsure why the lender denied your loan application, don’t hesitate to reach out to them. Ask if they can explain what they look for in borrowers and what you can do to position yourself as a more attractive candidate for a loan. This information can come in handy when you apply for loans in the future.
Review and build your credit
Most lenders will consider your credit when they review your loan application. That’s why it’s a good idea to understand your credit standing and improve your credit history if needed. Obtain a copy of your credit report and review it carefully. If you find inaccuracies on your report, dispute any errors with the appropriate credit reporting bureau. Also, make your payments on time every time and pay down your debt.
Apply with a co-signer
A co-signer can help you get approved for a loan that you might not be able to qualify for on your own. This individual, which can be a family member or friend, will agree to take financial responsibility for your loan if you default. For this reason, a co-signer can be risky, and you should only apply with one if you feel confident you’ll be able to make your payments.
Get a secured credit card
A secured credit card is a lot like a traditional credit card with one key difference: it requires a cash deposit that’s usually equal to the credit line. The card issuer will hold the deposit as security if you don’t pay your bill. As a result, you’ll be able to pay for everyday purchases while your payments get reported to the credit bureaus.
The Bottom Line
While it can be frustrating to get denied for a personal loan, don’t let it get you down. Take steps like speaking to the lender, work to rebuild your credit, apply with a co-signer, or get a secured credit card. As long as you follow these tips, you’re likely to qualify for a personal loan or other forms of financing down the road.