Banks have three approval criteria that loan seekers have to meet. In addition to the sufficiently high income, the Credit Bureau must be impeccable. In addition, it is checked whether the loan seeker has a permanent position. If these characteristics can be met, a loan is approved. Usually a loan is rejected if the Credit Bureau has negative entries, the bank is then too risky to approve a loan. The entries show that there were payment problems in the customer’s past. The loan is therefore rejected. But what about the customer who experiences a loan rejection despite good credit?
Loan rejection despite good Credit Bureau – the situation
In order for a loan to be paid, an applicant must have a sufficiently high income. You have to pay the cost of living, rent, utilities and all other financial things. Therefore, the loan seeker should implement an income / expense plan before submitting a loan. All income is compared to expenditure. The best case shows moderate financial leeway. The bank will also draw up this budget and then issue a loan decision.
If the income is no longer high enough after deducting all expenses, the bank will reject the loan. However, there are other reasons. Those who receive unemployment benefits or Hartz IV benefits will only get a loan under difficult conditions, if at all. These benefits are government benefits that cannot be attached and banks do not recognize them as income. The same counts for parental allowance and child allowance.
Self-employed and freelancers also find it difficult to obtain a loan. The reason is the unstable income. Banks see this as unsafe. However, if a doctor takes out a loan, things are different. In most cases, the doctor has a fixed patient base that makes his income calculable. Likewise, the professional profile of a doctor alone shows a good credit rating.
The loan can be rejected despite a good Credit Bureau if the customer’s income is too low. A reasonable plus amount should therefore be left over from the budget so that the loan can be approved. However, a loan can also be rejected if the loan seeker has other liabilities, such as several loans or installment payments to a mail order company. But that alone does not result in a loan refusal, the installment amount and the term of the loans play an important role.
A loan seeker experiences a loan rejection despite good credit if he receives sick pay. Sickness benefit indicates that the customer has a serious illness where there is no end in sight. The bank then raises the question of whether the customer can work again at all, is he unemployed or is he incapable of occupational disability with a pension that nobody can live on anyway, let alone pay a loan.
If the customer is looking for a quick and easy loan, he could use his overdraft facility. If the bank has not yet made it available, the customer could apply for it. The bank will not refuse any money that is regularly deposited in the account. The amount depends on the monthly income. Often up to three monthly salaries are granted.
However, the overdraft facility should only be used for a short time because it is charged with high interest rates. With the overdraft facility, the user can also get into a debt trap. It is only intended for a short time, for example if an urgent invoice still has to be paid at the end of the month and the account is actually zero. If the overdraft facility can be balanced with the salary at any time, there is no reason to use it.
The loan rejection despite good Credit Bureau – the credit protection
If a loan seeker has too little income and the loan is rejected despite having good credit, naming a guarantor can bring the solution. But it must be possible for the borrower to pay the installments that then arise. It cannot be that a guarantor is named who has to continue paying the loan. The guarantor must also be fully informed about the guarantee. In most cases, the bank demands a joint and several guarantee, which poses a high risk for the guarantor.
If the borrower can no longer pay, he does not have to go through any legal instances; the guarantor is immediately brought into recourse. With this type of guarantee, the bank does not have to issue a warning. The guarantor must also be able to pay installments from the loan. The bank will examine carefully.
If a loan is rejected despite a good Credit Bureau, a second borrower can also be successful. But he is also responsible for the repayment of the loan. If the borrower can no longer pay, the second borrower must do so. That is why he too must have good solvency.
There can also be a loan refusal despite good credit if the loan seeker has a temporary employment contract, if he works as a temporary worker or is on a trial period. In addition to the visible conditions, banks also have in-house rules, such as a loan to be paid to the bank. If this credit reduces the customer’s creditworthiness, this could also result in a loan refusal despite good credit.
The income that banks demand must be above the garnishment exemption limit and have a attachable portion of at least 100 USD. If the income was reduced by a loan to be serviced, the bank will refuse. Even if the customer has a temporary employment contract, the credit opportunities are poor. The bank and often the customer do not know what comes after the time limit. Even then, a loan can be rejected despite having a good credit.
Banks are generous with a loan if the customer has a secure job from which a sufficiently high income comes. If the house bank does not provide a loan, the customer can look at the many direct banks on the Internet. Experience has shown that the loan approval is easier to obtain there, the credit conditions are not so strictly subject to rules.
With a loan comparison, a cheaper provider can be found and the loan application can be made directly via the comparison. It is not only important to pay attention to the interest rate, but also to make special repayments. Free special payments allow customers to repay their credit faster. Often, employees receive special payments or bonuses over the course of a year, which the customer could then pay into their loan. If these special repayments have not been agreed and the loan is paid more quickly, the bank loses interest income, which it recovers with a prepayment penalty.