The reasons why consumers apply for a personal loan are very different: some want to finance their new car, others face financial constraints due to expensive new purchases. If the application submitted to the house bank ends in a loan refusal, the horror is great.
What are the criteria for rejecting a loan?
There are numerous reasons why a loan application does not lead to the desired success. These can result in part from the general terms and conditions of the financial institutions or the legal regulations, which prevent trustworthy private lending. A large part of the financing requests is rejected as a result of a negative message from the Central Office for Credit Information.
This institution is the evidence center for credit information from credit transactions for legal and natural persons in Switzerland. Her main focus is to protect her contract partners from possible loan defaults. This is done by the respective bank transmitting the relevant data of the requesting customer in order to have their creditworthiness checked there.
If the information is to the disadvantage of the consumer due to poor payment behavior, this result often leads to a loan refusal. However, this decision also serves to protect him, since further loan rates would put an additional strain on the tight budget. There are also other reasons why a reputable provider refuses the loan. Personal loans are often denied if:
- the credit request is made during the trial period even though there is an open-ended employment contract
- the income comes from a temporary employment relationship
- the level of income is too low
- the applicant is too old or too young to lend
- Seizures of wages, open debt enforcement or loss certificates exist
- the applicant is self-employed and the start of self-employment was less than 24 months ago
The aforementioned reasons for refusal are largely due to the lack of security on the part of the consumer. It is generally not possible for freelancers, the self-employed, and employees with fixed-term contracts to submit appropriate evidence of their stable income situation. As a result, banks suspect that the risk of loss of earnings is particularly high. With regard to payment behavior, bookings from debt collection agencies, an overdraft facility credit, and return debits, in particular, put the applicant in a bad light.
But the age of the bank customer is also of crucial importance: in order to be able to benefit from a personal loan, the customer must be at least 18 years old. Legislators stipulate this age limit because they become legally competent when they reach the age of majority. Likewise, very old age can lead to the refusal of the loan because a full repayment is not guaranteed due to a higher mortality probability.
How should you react if the loan is declined?
Even if the bank does not approve your application, you are not condemned to inactivity. First, you can contact the relevant financial institution and have the reasons for rejection explained. Only with this knowledge will you be able to look for serious alternatives.
Loan rejection due to negative information
If this leads to a refusal of credit, you can request a free personal report from the central office for credit information. If you find on receipt of the documents that there are unjustified, negative entries and can prove this, you should request that the incorrect data be deleted immediately.
After the removal, nothing stands in the way of a second request. However, if the note is justified, a discussion with the bank may make sense for further financing options.
Rejection due to insufficient income
Even if you work full time, your monthly salary may be too low to grant a personal loan. Because the release is not dependent on the amount of the actual monthly income, but on that of the attachable earnings. The decisive factor is the cover, which is truly at your free disposal. In order to calculate this, the expenditure is compared with income. It can, therefore, happen that due to existing obligations or excessive monthly expenses, only a small residual income remains and this fact leads to the refusal of the loan.
Reason for rejection credit scoring
In this case, too, there is no need to despair. Since every financial institution works with different evaluation criteria in this context, you can make one or two further credit inquiries from other banks.
In order to prevent further rejections, you should inquire in advance with the respective financial institutions about their loan terms. However, don’t overdo the number of loan requests as many denials will negatively impact your scoring value.
Cancellation due to lack of creditworthiness
If your creditworthiness is negative, you will not receive a personal loan. Attending debt advice is a sensible reaction. It will help you to put your finances in order and to reduce the mountain of debt that may exist.
Are you now unsure whether you would receive an installment loan from your house bank? Are you looking for a reputable and competent financial advisor, with whom you can inquire in advance about the conditions without obligation? Then you are at the right place at Good Credit. Do our free credit check and you will receive the result within a few minutes. Or you can call us straight away to get advice from our expert loan experts.