If a bank refuses to lend to a loan seeker because they cannot meet the requirements for the loan, loan seekers usually have a problem. They often wonder if there are ways to get the loan despite being rejected by the bank. If consumers understand correctly why banks make which decisions, they will be able to find another bank that grants a loan despite being refused.
How banks make decisions
Similar to the market economy with its many facets, the world of banks works on the financial market. Consumers who follow the events on the financial market have noticed that the banking landscape has changed significantly in recent years. Since internet and online banking has been around, consumers no longer have to go to a bank branch or the house bank to take out a loan. There are now direct banks that operate entirely without branches. The direct banks only sell their products, including loans, online. This enables them to work extremely efficiently and cost-effectively.
You have no costs for renting branches and, accordingly, significantly fewer staff with correspondingly lower personnel costs. That is why the direct banks give their loans to consumers on more favorable terms than branch banks. For the most part, they pass on the cost advantage created by the leaner structure to their customers. In order to keep the risk of a loan default as low as possible, the direct banks have also taken various precautions. There are binding guidelines according to which loans must be granted.
However, these guidelines vary individually from bank to bank, just as the interest on loans varies from bank to bank. Anyone who gets a loan from a bank despite being rejected by another bank can always assume that this loan will probably also be granted under poorer conditions. Borrowers have to pay the greater credit default risk with higher interest rates.
Consumers who have already made several credit inquiries online but have so far only received rejections should contact their house bank about the loan. In such cases, the house bank is often the first choice. Here, loan seekers can have a personal conversation with a bank advisor. Discussions can be clarified and facts, such as an entry in the Credit bureau, better explained. There is also the possibility to ask for alternatives. Sometimes it is sufficient if the amount of the loan is not too high or if the term is chosen so that the monthly rate can be paid from the freely disposable income. If there is really no creditworthiness, a solvent guarantor of the bank can serve as additional security.
If a loan application was rejected by a branch bank, the reasons for the rejection can also be asked on site. Occasionally it is just little things that can be clarified. Sometimes it’s just because the monthly charge is too high because the loan term is too short. The monthly rate burden should be within the disposable income. Consumers can calculate this in advance if they prepare a household bill in which they deduct the fixed expenses from their monthly income. The rate can be influenced via the loan term. The longer the term, the lower the monthly rate.
If loan seekers know the reasons for the loan refusal, they will be able to better prepare for future talks. The next credit request can then be made taking into account the bank’s instructions. Loan seekers should allow two weeks before the next request, if possible. The bank will then not be able to recognize that there have already been credit requests in advance.
By the way – the banks enjoy freedom of contract. You can grant or refuse credit. Legislators cannot make regulations, they can only create legally regulated framework conditions. To get a loan despite rejection, consumers should open up other options. For example, good friends or relatives can be asked for a loan. There is also credit from private individuals on relevant portals and there is the possibility to go to the pawnshop or to take out an existing life insurance policy.