When trying to get a loan from a hard money lender, there are a few things you should be aware of that could end in you getting your application rejected. Read on to find out what scares these kinds of money lenders and what you can do to increase your chances of being accepted:
There’s Some Kinds Of Error On Your Credit Report
Mistakes can be made on a credit report. In fact, these errors are more common than you might think, and can easily stop you from getting a loan that you’ve applied for. According to studies, 1 in 4 consumers found at least one error on their credit file.
Payments may have been reported incorrectly, and accounts you have closed in the past may still be showing up as open. Mistakes involving late payments can be particularly harmful to your efforts, as they can lower your credit score further. Before applying for a loan, you should always check your credit report for indescrepencies and if something doesn’t look right, you should report the information so that it can be rectified.
Your Credit File Isn’t Bulky Enough
Building a good credit file is important if you’re going to lend money. However, it can be a bit tricky. You need a good credit score to be approved, but you need to be making payments on some kind of loan or some other kind of debt to improve your score. If you’re struggling to secure a loan but you don’t have a lot of experience using credit, this could very well be the problem. Applying for a credit card before applying for a loan could help you to secure the loan eventually.
You can get both secured and unsecured cards. One is for people with bad credit or not credit, and they will require you to hand over a cash deposit before you are approved. A secured card can help you to build your credit and improve the odds of getting a loan later on down the line.
You Have Had A Loan Application Rejected In The Past
You shouldn’t keep applying for loans if you have been rejected in the past. These applications are recorded, and in turn can lower your score. Wait till you receive offers before applying to other banks – never apply to many at the same time. You can then look at rectifying errors before applying again.
You’re In Too Much Debt
Lenders will always look at your debt to income ratio, and if you’re in too much debt, they will reject you. They will look at how much of your take home pay is used to pay off debts each month and make their decision that way.
If you’re handing over anywhere from 40-50% of your earnings to pay off your debts, a money lender will usually see this as a bad sign. You may be considered a risky borrower, and they will question whether you will be able to meet this new loan obligation. Before applying, paying off some of your current debt is a good idea.