5 Reasons Your Loan Request Was Rejected – What You Can Do About It

Many people across South Africa are looking for ways to gain access to money fast. Cash loans are important for many households to help bridge the gap until payday. Sudden unexpected bills, medical payments, car payments, or other costs may raise their head, and without any savings to fall back on, some people decide to apply for a loan instead.

There are plenty of good reasons to apply for a loan- but also many reasons not to. Cash Loan provider Wonga urges people to apply responsibly for loans – that is, not to apply for them when you really don’t need to. The topic of the financial world lately has been about education with finance and borrowing sensibly. Wonga has become part of this by setting up educational resources where they explain the import difference of ‘good’ versus ‘bad’ debt:

5 Reasons Your Loan Request Was Rejected
5 Reasons Your Loan Request Was Rejected

Looking at it simply, they advise that you should look at the full picture when borrowing money, deciding whether you can not only meet the monthly repayments but also if you really do need that loan in the first case. Are there other options available? Could you borrow money from your friends? Could you tighten up your spending elsewhere? This is all part of the decision-making process and should not be taken lightly.

Once you have decided that a loan is a good option for you, you will want to apply for one from a reputable lender. This gives you the best cover as they will be insured. They also have a good team of financial experts working behind the scenes and who can advise you if you need clarification on anything.

A common misconception at this stage is that you can apply quickly for a loan online and you will simply be accepted and receive the money instantly. This is not usually the case – the lender will want to conduct thorough checks on your credit record.

Reason #1 for Rejection: You just can’t afford it

The first reason your loan application might be rejected is that the lender believes that you just can’t afford the loan. Business tech says, “They will consider your income, expenses and other debt that needs to be paid monthly. If your affordability is low, your application will most likely be rejected.” Ultimately, the lender needs to know you can repay the loan to them and so this is an important factor to consider.

Reason #2 for Rejection: Your credit score is bad

Your credit score is like a history book of your financial activities. It gives you a number that tells the lender how reliable you are likely to be with their money and your repayments to them. Interestingly, Experian rates the following reasons for how likely they are to affect your credit score directly:

  • Your payment history (35%) – this includes whether you pay bills on time or have had late or missed payments in the past.
  • How much total credit you have available to you (30%) – everyone will have a certain allocation of credit and the credit report looks at how much you have available to you and whether you are already using a large portion of it.
  • How long you’ve been using credit (15%) – It is important for the lender to get an accurate sense of how you handle your finances over time.
  • The mix of credit types you have (10%) – If you already have cash loans on your credit file, it is unlikely, for instance, that you will be approved for another.
  • The number of recent applications you’ve made (10%) – If you have applied for lots of credit recently but been rejected, this doesn’t look good on your credit file and so it will be marked down for this.

It is important to keep on top of your credit score because this is not just needed when applying for loans but also rental contracts, mortgages and savings accounts. It is a reflection of what you are like with money and can be accessed and read by you for free.

Reason #3 for Rejection: You are not employed

You need to be employed for the past 6 months to be approved for most loans. This is because being employed and receiving a regular wage proves a more reliable borrower and therefore the lender is likely to think you will repay them their loan based on your constant wage.

Reason #4 for Rejection: You don’t have a bank account

You need to have a bank account for the loan to be paid into. If you get paid in cash on a weekly basis and don’t put this into a bank account, then it is hard for you to prove you are earning a wage and does not look good for credit applications.

Reason #5 for Rejection: You are under debt review or have been blacklisted

If you have handled money poorly in the past, missed payments or been declared bankrupt, then you may well be blacklisted. This is not a type of borrower that lenders will want to do business with. Not only does it not fill them with confidence that you won’t be able to pay them back, but it is probably also best for you not to obtain any further debt at this stage. You may find yourself in a spiral of debt that you cannot get out of, if you continue applying for loans in this way.

If you are having financial difficulties, there is help available. You can contact Consumer Debt Help, which is an accredited South African debt counseling agency. The agency includes professionals who offer debt solutions for South Africans facing financial difficulties and debt pressure. Their advice can be invaluable and has helped many thousands of SA people in the past, no matter how big or small the debt.

Atif Mallo

Atif Mallo is a freelance blogger with huge interest in technology, science, life hacks and health. He loves coffee, cheesecake and chess. Drop a line in comments to leave feedback for him.

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