March 19, 2007, 2:19 pm

What to Do With Declined Cases (Part 2)

by: The Financial Blogger    Category: Credit Rating & Credit Bureau
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In the first part of this article, we looked at the major reasons why a file could be declined by a banker. We also looked at the possibility to add a co-applicant in order to qualify for the loan. Having a co-signor is not the only options, several other ways might be considered. Here are some examples:

Security

Depending on the type of loan you are requesting, you can offer different types of security. A security is an asset that is legally taken as collateral by the lender in order to guarantee the repayment of a loan. If the goal is to purchase a new car, you might want to give it as collateral. You will still be able to use it, but the bank will have a legal right on it. As cars are not necessarily accepted for any kind of loans, other securities can be considered. The most common types are mutual funds, GIC’s, other fixed income products and real estate properties. All of them can secure either lines of credit or personal loans.

Securing your loan can help if you have been declined because of high debt ratio, recent employment and poor credit behaviours. Depending on the situation, the financial institution might ask up to twice the value of the loan.

Consolidation Loan

If your request is refused because of high debt ratio, your can try to consolidate your debts first. As previously mentioned a consolidation loan will pay off your outstanding debt and bring together under one small payment. Bank might reconsider your application once your profile has been improved. Consolidate your debt as soon as you can. At the moment that banks noticed you are having financial difficulties, they will be more reluctant to deal business with you. Basically, they are in when there is no risks for them!

Other Products

Some people might be declined for a flex line but be approved for a personal loan. The main reason being products are regulated by different norms by banks. Therefore, some product request less criterions than others.

Look Elsewhere

If you have been turned down by one bank, it doesn’t mean that the same story will happen elsewhere. As it is the case with credit products, financial institutions have different criterions of qualification among themselves. Some are specialized in high risk loans and will be more willing to grant loans to an individual with poor credit rating. The bad side of it is that they might charge an arm and a leg for their loan. You can always start with this kind of loan, make your payment on time and transfer to another institutions with a better rate and better lending conditions later on. It will be easier to transfer a loan in good standing as you have proven your capacity of respecting your financial obligations.

Unfortunately, sometimes you just can’t get it through. This situation could happen after several late payments. The best solution in this case is to rebuild your credit history by making your payment on time over a long period of time. In the end, lending is always a matter of trust; hard to gain and easy to loose!

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