For the bank or loan agreement, a loan is primarily a business. This is supposed to bring profit through the loan interest and no losses due to missing installments or even the complete insolvency of the borrower. Therefore, the lender must use all of the available parameters to calculate the likelihood of the loan being repaid. So this has less to do with personal reasons and nothing to do with luck, but simply with concrete criteria and facts.
Banks are also regulated by law and regulations when granting loans: They must first get a comprehensive, up-to-date and secure picture of the creditworthiness of the potential customer.
What are the most common reasons for a loan rejection?
In most cases, the rejection is not based on formal errors (e.g. documents forgotten when applying for a loan) but on insufficient guarantees that the applicant can offer the lender.
- Your own income is too low or your expenses too high
The bank not only looks at the monthly wages or other income, but above all at what these regular expenses stand in contrast to. If these are so high due to rent, other current loans, leasing or maintenance payments and the cost of living that little or nothing is left per month, the bank simply has to refuse the loan. Even if you do not disclose such current expenses in the self-disclosure, the bank usually gets this from credit agencies and the trust in customers is permanently disturbed. But even if you can cheat yourself, there is still the risk of a subsequent termination of the credit without notice and the full amount in one piece being reclaimed.
- You are still in the trial period
This is also too unsafe for the bank, as it is easy to cancel here.
Click here for our topic page “Probationary period loan”
- You only have a temporary employment contract
If you are only employed for a limited period and the time limit is before the planned end of the loan, the loan is usually rejected here as well. The same applies to temporary work.
- You have a negative Credit Bureau file
Banks obtain Credit Bureau information about the borrower when applying for a loan. If this indicates bad creditworthiness through a corresponding history, the bank will also reject the loan. In this case, please also note our topic page “Opportunities for loans without Credit Bureau”.
- Insufficient account funds / suspicious debits
With the required documents for the loan application, the most recent bank statements must also be included. If it can be seen from these that direct debit authorizations that are already in progress cannot be serviced and this leads to return debits, this is also a warning signal for the bank. The same applies to an account that is permanently in the overdraft facility or even beyond. If there are even debits from collection agencies on the bank statements, the bank no longer needs clairvoyant skills to identify potential problems with loan repayment.
- Unfortunately, you are too old
Although people are getting older and longer in their active lives, the banks have an age limit from which they can no longer issue normal loans. This varies from bank to bank and is not readily disclosed. Please also see our topic page “Loans for pensioners”
- You have n’t been self-sufficient long enough
Loans for the self-employed are a challenge for banks. You cannot include attachable income in the calculation, but rely on the balance sheets and the assessment of the sustainability of the company. If the loan applicant is only self-employed for 1-2 years, there are simply no reliable figures for such forecasts.
What should you do if your loan is declined?
In any case, do not fall for dubious offers that promise an “uncomplicated and quick loan despite rejection from the bank”. First of all, despite all the disappointment, one should understand the rejection as a factual criticism and as an indication to improve one’s own situation. Don’t be afraid to take advantage of free professional advice (e.g. debt counseling).
If, after honest self-reflection, you are absolutely certain that you do not want to take out a loan unreasonably, hopefully reputable credit advisors can help you.
The search for a bank that easily grants loans may also be a variant. However, you should note that with every binding loan request, a corresponding temporary note is usually stored in the Credit Bureau file, which in turn can lead to a deterioration in the creditworthiness of the next loan application.