Not being able to get a loan can be devastating, especially if it’s for an emergency. The problem is that banks don’t really like to hand out loans to people or businesses they don’t know. They’d rather deal with established businesses any day of the week, and unless you have stellar credit and a good reason to get a loan, you might have a lot of trouble getting approved for a personal bank loan.
This doesn’t mean that you should give up, however. Depending on your situation, there could be other options that you could look at and things that you could do to increase your chances of getting approved next time. Here’s what you need to do if you can’t get approved for a bank loan.
1. Ask Why You Were Rejected
The very first thing you should do if you were rejected for a loan is to ask the bank why. Most banks will be more than happy to tell you and are required to reveal certain information to loan applicants, so don’t be afraid to ask.
Knowing why you were rejected is very important as it will inform what you should do next. You could’ve been rejected because you had no credit history or a bad one, a high debt to income ratio, or unverifiable income information. These will all require different courses of action, so know the reason why you didn’t accept before you do anything.
2. Examine Your Credit Report
If the reason why you were rejected is poor credit, you need to get copies of your credit report immediately. Get copies of your report from both Equifax and TransUnion and review them. See if you see any mistakes or irregularities.
If you notice any entries you weren’t aware of, call the creditor and ask if you can work out a deal. Ask for the entry to be deleted once the account is paid off and make sure that all the details are written on paper.
3. Look For Alternative Lending Options
If your credit is in horrible shape but you still have a regular and verifiable source of income, you could always look at a payday loan. These are especially good if you need money for an emergency and feel confident in your ability to repay the loan. If you can’t repay your payday loan immediately, the extremely high-interest rates can destroy your finances.
Some services will give you an e-transfer loan on the same day you apply if you meet their requirements, so that could be perfect for you if you need money fast and have exhausted all of your options.
If this is for a business, then there are plenty of things that you could do. You could check if you could offer some of your assets as collateral, for instance. Collateral can be anything from real estate to equipment, to vehicles, or even inventory in some cases. So, don’t assume that you have nothing of value to offer and ask lenders what they’ll accept.
Another option would be to go for invoice factoring. With this option, you can get a loan against invoices that are due to you at a later date. In this case, your clients’ credit will have the most influence on whether you get a loan. That could give you the chance to get financing even if your business’s credit is bad or if you didn’t have the time to establish a history.
These are all things that you can do starting today if you’ve been turned down for a loan. Whatever you do, do not start applying for multiple loans as this could hurt your credit, and know exactly what you need to do to be a better candidate in the future.