Why does the bank refuse a loan and what to do in this case?
Banks have strict procedures on which they grant loans. To take advantage of funding, you must meet strict conditions and go through a number of formalities. Due to the rules constructed in this way, many clients have to face the decision to refuse to grant a loan. Why do banks reject so many loan applications?
Why do banks refuse a mortgage?
A mortgage is a liability even for several decades, which is why banks are particularly meticulous in verifying their clients. It is not easy to get such a loan, therefore negative decisions are not uncommon. The reasons for refusal can be really different, but the most common are:
- too low income,
- unfavorable credit history in Credit Checker,
- too many obligations currently being repaid,
- age criteria not met,
- lack of creditworthiness,
- unstable financial situation.
The above-mentioned reasons apply not only to mortgages but also to other financial products, such as account limits or consumer loans.
Does the bank have to provide a reason for refusing a loan?
Until 2019, the bank was not required to inform customers why it refused the loan application. This changed with the entry into force of the GDPR Act, which introduced significant changes to the Banking Law.
According to current regulations, banks are required to inform clients what influenced their negative decision in granting the loan. This is a great help because before the next submission you can try to improve your situation.
Credit refusal – what to do?
Knowing the reason for rejecting an application, you can take appropriate steps to increase your credit standing. It all depends, however, on why the bank decided to reject the application. In the table, we have gathered the most popular reasons and suggestions for solutions.
It is not easy to get financial help from a bank, so use the alternatives available. What instead of credit? Certainly, a non-bank loan will be a good solution, because it is granted on simplified terms. Additionally, repaying it on time, you will improve your credit history and you will be more likely to get a loan from a bank.