When getting a small loan, there are some things to consider, documents to retrieve, and even calls to be made to ensure that you have covered all the bases and requirements. But what are the reasons you can get denied a small loan?
Before we can answer that question, let’s explain why a lender may be picky about who they give a small loan to. The reason for this is that they usually can’t just give a small loan (especially if it is an unsecured loan) to everyone. They would lose plenty of money from their own lending business if every person they give a loan to could not afford to pay it back.
This is where things like income, employment and credit scores come to play because they are essentially the “resume” that a potential borrower comes in with that let’s a lender know whether you can be trusted to pay the loan off, or not.
With that out of the way, here’s just a few reasons why one could be denied a small loan.
- Credit report inaccuracies – What if someone has great credit, does not carry debt, and pays everything on time, but their credit report does not demonstrate that? Unfortunately, no one is safe from computer or internal errors on their credit report. What’s worse is that this error could hold someone back from getting a small loan until it’s fixed. This could be one bad wake-up call if it’s after being denied a small loan.
- Incomplete or incorrect loan application – There are times where human error could be the reason why one could be denied a small loan. Missing one box or line from a loan application could instantly make one lose a chance in getting the small loan they need.
- Job instability – A stable job generally means stable income, which could give a lender more comfort when determining who can and cannot get a small loan. Those who are recently unemployed may find it even more difficult to apply for a small loan, especially if no income is currently coming in which may impact their chances to get approved for a loan.
- Not enough income – Maybe one has a job, but the income is insufficient to where the debt to income ratio is leaning toward their debt. This can be a problem, as bad credit could ruin chances of getting a small loan.
- Credit report indicates bankruptcy – If one has a rough history of bankruptcy in their credit report, many lenders could walk away as soon as they see it. Lenders may feel they would pose a risk if given a small loan that they may not be able to pay back.
- Debt to income ratio too high – Accruing too much debt that one finds difficult to get rid of may be one of the contributing factors to being denied for a small loan. Many lenders see debt on a credit report as risk and could deny a small loan to someone who has too much of it.
- Credit card utilization – If someone uses a credit card often, the larger the percentage of their utilization generally. Lenders may see that as a potential risk, especially if they max out credit cards.
There are so many other reasons someone could be denied a small loan, but what are some precautions and tips that one could use to prepare themselves when it comes to applying?
Tips to avoid being denied a small loan
When applying for a small loan, here are some suggestions one should consider before they pick up that pen:
- Look at your credit report before they do: Catch those credit report errors or look at your credit report so you know exactly what to expect before applying for a small loan.
- Make sure everything is up-to-date: Always be sure that your good credit is still good credit. Always be on the look-out for any past transactions or debts that you may have been holding off.
- See what lenders are looking for: Sometimes to see how a lender could deny you a small loan, you could check their website or requirements they are looking for. It’s never too late to get some research on a lender.
- Improve your credit as much as you can: Paying off debts could also be a way to improve that credit score.
Although there are so many ways to avoid being denied a small loan, there is still a chance that it could happen. But there are also some alternatives to things like a small loan from a bank. A car title loan for example is a secured loan that worries less about a credit check or how much debt you have.
In fact, we at LoanMart consider our own car title loan a good way to possibly get the financial funding that you may need as soon as possible1.
Why LoanMart may be able to get you a small loan with a car title loan
A car title loan is a secured loan, which means you give collateral to receive the loan. This can be good for people that come from a variety of different financial backgrounds. With a car title loan from us at LoanMart, we don’t look at things like credit scores or credit card utilization.
In fact, we only look at a few things that you could easily provide (many of these documents could be found in your home):
- Proof of income like pay stubs, account statements, etc.
- Proof of residence
- State-issued photo identification
- Qualifying car title
By using your car’s title, we may be able to give you a car title loan that could provide quick and simple funding through our streamlined, three-step process1. Want to find out more? Call us today and we will be happy to answer any other questions regarding a car title loan.
If you want to get a small loan that may not be denied by things like a credit score, you can apply online today and see if you qualify for a car title loan with LoanMart.