7 Reasons Banks Refuse to Loan & 8 Ways to Fix the Problem

Refused! Have you heard these words repeated when you attempt to get a bank loan? Why do banks reject your request? What can you do to remedy the situation?


Getting approved for a loan with less-than-perfect credit is difficult. The good news is that if you cannot borrow money from a traditional bank and your credit card applications are rejected, you still have options.


7 REASONS YOU’VE BEEN REFUSED | There are plenty of reasons for which a financial institution might deny your request for a loan, whether it’s a personal loan, a car loan, a mortgage or otherwise. Can you relate to the following situations?


· Your Debt Is Too High | If the percentage of your debt is too high, your request for a loan may be denied. Generally, financial institutions will allow up to a debt rate of 40% of your annual revenue. In the case of a mortgage request, the total amount for a mortgage and necessities (loan, insurance and taxes) cannot surpass 32% of your annual revenue. Your total debt rate, including mortgage and cards, cannot exceed 40 – 42% of your net income. Use this debt calculator tool to find your total debt rate.


· Your Salary Is Too Low | Banks will verify your ability to repay a loan. They will not approve your application if your salary isn’t enough to cover necessities and debt.


· You’ve Changed Careers | A change in employment can prevent you from qualifying for a loan. Financial lenders are looking for someone financially stable. For example, in the case of a mortgage, it’s preferable that you have had the same employer for at least the past two years.


· You Owe Money to Debt Collectors | If your present situation includes owing money to debt collectors, you will automatically be refused. Lenders only lend money if they know the borrower will repay it. Since debt collectors are placed in action for debts that haven’t been repaid according to the terms in place, you will not qualify to take out any more loans for the time being.


· You Have a Poor Credit Score | In Canada, your credit score can vary between 300 and 900. In general, a healthy credit rating falls at 650+. Traditional banking institutions may require a minimum credit rating of 680 for a mortgage request. If your credit rating is less than 600, you will most likely be denied a loan.


· You Don’t Have a Sufficient Down Payment | In the case of mortgages, a down payment of at least 5% of the total buying cost is required. If you don’t have this down payment, you will not be approved for the loan.


· Your Home Is Valued Too Low | If you are applying for a mortgage, the bank will request an evaluation of the home’s market value. If the house’s market value is worth less than the selling price, your loan will be denied unless you have the funds to cover the difference.


8 SOLUTIONS FOR GETTING APPROVED | There are a variety of solutions to help you get a loan, even after having been denied one. At least one of these alternatives can be more convenient than applying for a traditional personal loan from a bank. Read on to find out which kind of loan will get money in your pocket faster than any other option.

· Stop applying for bank loans and new credit cards | The first thing to do if your past loan applications have been rejected is to stop applying for these common forms of credit.


Stop filling in applications, as every single one goes on your credit report, even if you get rejected. This could make getting loans in the future even more difficult, as credit card companies and banks researching your financial history can see past rejections.


· Lower Your Debt | Lowering your debt will lower your debt rate. Try the following steps.


o Make a budget, listing your income and expenses over two months.


o Find ways to save money or cut expenses.


o With the money you save, make additional payments to the debt with the highest interest rate. Make sure to continue paying the minimum owed on your other debts.


o Once your highest interest rate debt is paid, continue in the same vein until you no longer have any debt or at least a debt rate that is low enough to be approved for a loan.


· Increase Your Credit Score | There are several ways of increasing your credit score.


o Pay your bills on time.

o Never use more than 35% of your available credit.

o Avoid asking for additional credit unless absolutely necessary.


You can consult your credit score for free via Equifax and TransUnion. It’s important to regularly consult your account to ensure it is accurate and up to date.


· Get a secured credit card | If you need money to buy food or other necessities from time to time, a secured credit card might be the best answer. These cards work just like regular credit cards. When you use it and pay it off, the transaction is reported to the credit bureaus just like a standard card. This can be a good thing for your credit history.


The catch is that cardholders must make a security deposit before using this card to make purchases. So, although it is a good option, mainly because it helps to build a positive credit score, a secured card may not help in the short term (if you need funds quickly).


· Have Someone Co-Sign | If you are sure that you can repay your debt, ask someone close to you to co-sign your application. It’s important to remember that any late payments will negatively affect your cosigner’s credit as well as yours. Your cosigner will be held responsible if you do not repay the loan, and you will most likely lose your good standing with that friend. If you choose to have a co-signer, you must be 100% sure you will repay your loan without delay.


· Online Loans | If the bank has refused you a personal loan, you can still apply for an online loan. Online lenders, like 24Cash, are less strict in their criteria than traditional banks and don’t affect your credit score. You are eligible for an online loan if you have had a stable job for at least one month and earn at least $1200 or more a month.


Online lenders focus on your current ability to pay back your loan, as opposed to your history and whatever unfortunate challenges you may have faced. The only supporting documents you need to provide are a pay stub and bank statement (or other evidence of steady income). Another benefit is that these loans are generally approved quickly, often within hours.



· Use a Mortgage Broker | If you have had trouble getting a mortgage, you can try passing through a mortgage broker. Brokers have reliable contacts with multiple financial institutions and know which ones are more likely to be lenient in approving a loan to someone with your financial situation. They can also vouch for you and explain why you are a good candidate. In the case of a refusal, they can also provide you with the reasons why you were refused and tips on remedying the situation.


· Apply for a Guaranteed Loan | You can see your financial institution’s options regarding leveraging your assets for a guaranteed loan.





Preparing now is the best way to ensure approval for a loan when you need it.


Make sure you have a good credit score and acquire the least amount of debt possible. Correcting a misguided past will help you build a stable fi

Get your online loan, paperless & fast.

Quick Personal Loans for Canadians :

  • No credit investigation
  • No documents required
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Get your online loan, paperless & fast.

Quick Personal Loans for Canadians :

  • No credit investigation
  • No documents required
  • Repay in up to 90 to 120 days
  • $500 short-term loans