Big banks don’t lend money as freely as they once did. Despite the bailouts and financial boosts that financial institutions received, banking chiefs claim that they have no obligation to make new loans, according to Mara Der Hovanesian and Christopher Palmeri, writing in “Bloomberg Businessweek.” Unless you’re the perfect loan applicant, you could have a tough time finding the cash to fund your future endeavors.
5 You Have No History as a Borrower
If you’re young, have never had a loan, never possessed a credit card, don’t have a bank account or never paid a bill in your life, your lack of credit history may make a bank nervous. If there are no records about your creditworthiness, there’s no way for a bank to tell if you’re worth the financial risk. Building a positive credit history can help improve your chances of getting a loan from a bank.
4 The Bank Is Overly Cautious
Banks make money from providing loans, according to Paul Solman for PBS’s “NewsHour.” Some banks are nervous that federal regulations will cause them to lose money on some new loans because they might depreciate in value. If the bank’s capital doesn’t cover the losses in depreciation in new loans, the bank could find itself in trouble.
3 You Can’t Realistically Repay
When you apply for a loan, a bank may want information about your assets, expenses and current employment situation. Yes, this is nosy, but it helps the bank determine if you can make the monthly loan payments. If you don’t have a job, enough money saved or earn enough income to cover your expenses, there’s a good chance that you can’t afford a loan.
2 You Have a Bad Reputation
If you’ve worked with the same bank for a while, a reputation as a bad borrower or customer can hurt you. Over-drafting your account, defaulting on bank credit card payments, constantly losing your debit card or a series of bad investments can make a bank run the other way when you apply for a loan. You might have to clean up your act before your bank thinks twice about lending you money.
1 Your Credit Score Sucks
Your credit score is like a record of your financial past. Items like missed utility bill payments, the amount borrowed on your credit cards, doing bankrupt or having a bill sent to collections hurt your score. When you apply for a loan, a bank looks at your credit score to determine your creditworthiness. If your score is low, a bank is less likely to approve your loan application because you pose too much of a financial risk. You’re statistically more likely to default on your loan payments. Make the effort to recover your credit rating to improve your lending approval odds.