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Debt Consolidation Bad Credit Loans Home Loans

10 Reasons Your Home Loan Was Denied

Most people believe a good life is having that killer home and a stable job. But what happens when you try to apply for a loan and get rejected?  It can become increasingly disheartening to hear the same 9 words –  “we are sorry your loan application was denied.” In this article, we dig deep and reveal the reasons why your home loan was denied.

Understanding the reason behind your loan denial is a valuable learning experience. This reason helps you to pinpoint the areas of your financial life that need to be polished. You can always improve on this and reapply for the funding.

 Let’s dive right into the ten reasons why your home loan was denied

Poor Credit History

Credit history is simply a record of a borrower on debt repayment from several sources, including banks, collection agencies, or credit card companies. Potential creditors such as the Australian Lending Centre and other mortgage lenders use your credit report or information to decide whether they will give or deny you a loan. Your credit information is the right way for lenders to tell whether you are a risky investment or not. Having a poor credit history will deny you a home loan.

If you check your credit score and you find that you have defaults, blackmarks or court judgments, it is highly recommended that you remove these otherwise you will struggle to secure funding. There are specialised credit repair agencies that can assess your credit situation and work towards removing these negative listings.

Insufficient Income/Asset Documentation

One of the big reasons why your home loan application may be denied is due to your income or debt ratio. Your income is an excellent measure of whether you can or cannot afford the home. ALC is likely to enquire about your assets and, more specifically, your liquid assets. They’ll want to identify what you have saved to raise a down payment, pay closing costs, and make monthly loan payments once you close your loan.

You have to make sure that you have sufficient income or assets before you apply for a home loan. It is essential to have your resources in a certified account, at least two months earlier, to applying for a home loan. It is because banks and lenders regularly ask for your two latest bank statements. Also, make sure you verify your assets for a down payment, closing costs, and reserves.

Down Payment is Too Low

Typically when you buy expensive things on credit, you need to make a down payment. The down payment amount usually covers a portion of the market price of the home. Lenders look at the upfront amount as an investment in their future home. A low upfront may not put their minds at ease. To certify your home loan application, consider having a more significant down payment, or else your home loan will be declined.

Problems with the Property

Sometimes you are not the cause of a home loan denial. It is not always your fault. Your home loan denial may be due to problems with the property you want to purchase. Therefore before you apply a loan for a particular home, do thorough investigation and research about the property.

Inadequate Employment History

Your employment history is essential when it comes to a home loan approval. You should have a consistent job history when applying for a mortgage home loan. Most lenders will consider two years of steady employment history to process your loan. By doing so, they only want to be assured that you can hold on to a job long enough to repay the debt. Make sure to keep all your payslips and any tax information. You will want to make the process as easy as possible for lenders.

Inaccurate documentation

Home loan lenders want to know everything about you, and therefore, leaving out any information may raise the alarm. It is always good to provide all the required details and fill out all the sections on application forms.

Reduced Debt to Income (DTI) Ratio

Most lenders look at DTI Ratio before awarding a home loan. DTI Ratio is simply a sum of your monthly payments divided by your monthly income multiplied by 100%. You should always aim at 45% and below.

Unpaid Taxes

Taxes are significant to a country’s income. A due fee is another debt that can haunt you. It can lead to a robust rejection of your home loan application. Make sure to work through old debts before applying for a home loan.

You Asked for Unreasonably Low Loan

Most lenders give loans based on how much interest they will make. The lower the investment, the lower the benefit they will gain. Therefore, you should understand that lenders make money from interests that are higher on high loans than small loans. They factor their profit against their risk, so it is unlikely for them to approve a low loan request.

Bulky transactions

Just like receiving huge money, large transactions may raise red flags when applying for a loan. You should not make large transactions as you near a home loan application period. Stick to low operations and always be ready to explain the purpose of the transactions. Valid documents should accompany this.

Final Thoughts

Now that you have learned and you are well aware of the reasons that can lead to your home loan denial, you only need to rectify what is dragging you behind.  Make sure that all the above are taken care of before requesting a home loan, or else it can get rejected. If your loan is denied, remember it is not the end. Focus on building positive financial habits that will help you increase the likelihood of securing a loan.

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Bad Credit Loans

No Guarantor Bad Credit Loans Explained

Having bad credit can be stressful. That’s because a bad credit history has immediate consequences on your financial future. It impairs your ability to get a home loan, a personal loan or any other form of credit. If you’ve defaulted on loan repayments, applied for a credit card or entered a debt agreement, all these aspects can significantly affect your finances for years to come. Fortunately, no guarantor bad credit loans are a possibility. Find out your options below.

How can I get approved for bad credit loans?

Obviously, there are some things you can do to maximise the likelihood of getting a suitable loan, such as the following:

Avoid making numerous credit applications simultaneously

This may seem like the guaranteed way to obtain a loan; in fact, the more applications, the higher the odds of getting a loan, right? In fact, that is far from being true. This is a red flag to lenders, even for those who provide bad credit loans. This strategy could deter you from accessing credit in the future. If you already did that, you should at least wait for a while until you make other applications.

Use a personal loan calculator

Personal loan calculators can be genuinely helpful. You can use one to determine if you can afford to make repayments for a certain loan or not. Bear in mind that lenders will accept your application only if you have the financial means to make repayments. This applies to both bad credit loans and conventional loans.

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Check your credit score to know where you stand

Let’s say that you already know that your credit rating isn’t the best. However, we advise you to have it checked. This way, you can verify your standing point. Apart from that, your credit rating may contain mistakes and inaccuracies. In this case, you can have them corrected.

What are my loan options if I have bad credit?

If you want to get approved for bad credit loans without a guarantor, this reduces your options. The primary reason why it is recommendable to opt for guarantor loans is that this increases your reliability as a borrower, maximising the likelihood of obtaining the desired financing. However, you can also opt for the following:

Secured personal loans

An option would be getting a secured personal loan, involving collateral such as the equity in your home or another significantly valuable asset. This way, a lender would be more willing to provide you financing, overlooking the negative listing on your credit history.

However, the obvious risks that come with the territory are that if you default on the loan, you’ll end up losing the asset placed as security. Even so, without collateral and guarantor, your chances of getting a loan are minimal, unfortunately.

Short term loans

If you want to borrow a fixed sum, up to $2,000, you could pick a short-term loan from a payday lender. The thing is that these lenders don’t concentrate on your credit history. In fact, they are much more focused on your current financial possibilities and capability of making repayments.

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What Else Should I Consider?

It’s important to note that bad credit loans with no guarantor are high cost. This is a general rule. So, you should know what to expect if you do decide to go for it. Obviously, these loans involve high risks for the lender. Therefore, it makes sense that the lender would charge enormous fees.

And lastly, bear in mind that numerous disputable lenders operate in the realm of bad credit loans. In other words, you should pay attention to scammers that might claim to solve all your financial difficulties, irrespective of their severity.

So, we strongly recommend you to double-check each loan and its specifications noted in the fine print before signing any documents. ASIC has actually warned Australians that they should be doubly wary when it comes to applying for bad credit loans due to the high-interest fees and inflexibility. Apart from that, the repayment period could be shorter than in the case of conventional loans, which would make it even more challenging for you to deal with the situation.

Additionally, make sure you factor in the additional fees, which are added to the costs of the loan, aside from the interest rates.

Conclusion

When you apply for a no guarantor credit loan, you should be wary and attentive to the loan terms. If your financial position allows you, you should wait a while until you may afford to get another type of loan, to avoid paying a significant amount of money in interest fees and other charges.

By all means, choose a reliable lender. On that note, contact us for a free consultation and assessment for your loan enquiries as our experienced specialists are keen on helping people with bad credit and provide them with excellent services. Call us now on 1300 138 188 or enquire here for our bad credit loan option today.