So, your application was denied, huh?
It's not a good feeling, but it's not the end of the world, either. Use this loss as inspiration to do a little financial self-care. Once you work on yourself a little bit, you can walk back into that bank with confidence.
The bank takes a holistic view of your financial profile before weighing in on your loan application. A little good here will outweigh a little bad there. If you were denied, it's probably because you need to make significant improvements to one or more of the factors they consider.
Quick, easy fixes
You need to pay closer attention to paperwork. The slightest mistake while filling out bank documents can hurt your chances of getting a loan. Mistakes can include misstating your income, address, or employer information. From the banks position, slip ups are a red flag. At best you were lazy or inattentive; at worst you were intentionally lying to a potential lender. If you got denied for this reason don't be too hard on yourself, but don't let those mistakes happen again.
You need a steady job. If your employment situation is too unpredictable it can scare potential lenders. They are depending on you to make money in the future – that's how they get repaid. If you have gaps in your employment history, banks will worry that your next stretch of unemployment isn't too far away. Lenders want to see that you can hold down a steady job for a long time.
Some industries are inherently sporadic, so contract workers and the self-employed may have to prove their case. Reach out to the bank directly, and ask how you can show that your work is financially sustainable.
You need a raise. Sometimes the problem isn't with the type or length of employment – it's all about the money. If you aren't getting paid enough to easily pay back these loans, lenders won't want to take the risk. Ask for a raise or get a job with higher pay, and lenders will feel more comfortable letting you borrow money.
You need to ask for less. Maybe you just got a raise, and you know your income is pretty set for the time being. That doesn't leave you with many options, so you might want to ask for less. Try to pick a number you know you can pay back, and bring in the pay stubs to prove it.
You can also shop around for another lender, who may give you the amount you want. There's nothing wrong with looking for the best deal, but keep trade-offs in mind. If one bank denied your loan and another accepted it, it's important to understand why. The accepted loan application might leave you with higher interest rates or other lingering negative effects.
You need to find a cosigner. It may feel like an adulting failure to walk into the bank with your mom or dad, but if you're running out of options and need a loan fast, it will help. Cosigners with good credit can sway a lender, even if your financial situation isn't great. Just be aware that your cosigner is putting their credit on the line for you. Don't miss payments, or it'll hurt them, too.
If at this point, you're thinking, "I've already done all of that," then your problem might be a bit more complex. So far, the problems have been quick fixes. Other issues require long-term work, but don't let that discourage you! The longer you wait to get started, the harder this work will become.
You need to fix your credit score. Your credit score is a big deal. It's shorthand for how much you can be trusted with money. It's based on all your debts throughout your life, from bills to credit card balances to car payments. You can improve your score by opening credit card accounts and paying off purchases right away. You should also avoid taking on debt to pay bills, or paying off debt with a credit card because that simply shifts around your debt. Since it takes such a wide scope, improving your credit score takes time. Keep at it, and you'll reap the benefits.
You need to pay off your existing debt. You credit score already touches on this point, but it's worth emphasizing. Banks don't want to help you stack new debt on your old debt. If you already have debt, you should pay it off before asking for a new loan. Skip the trips to the bar and nights at the movies, and put that extra money toward payments instead. If you can't pay off all your debt immediately, you should at least pay off enough to show that your debt will be eliminated soon.
You need to improve your financial planning skills. To put it bluntly, a bank may think you're too financially immature for a loan. This can be especially poignant if you're applying for a big loan that'll take a long time to pay off. If a loan is going to take 10 years to pay off, lenders want to see that you have the ability to plan your finances that far in advance.
Luckily, there are a lot of financial planning apps that make it easy to look ahead. If you spend some time with one of these and put together a long-term plan you can show a bank, they might feel more comfortable lending you money. Opening a retirement or investment account, which requires you to show restraint with your money, may help sway them, too.
Here's the deal. You shouldn't focus too heavily on any one aspect of your financial life, if it comes at the expense of other aspects. You should keep all these areas in mind, and try to strike a balanced lifestyle for steady financial growth across the board. Banks prefer that over dramatic fits and starts.