The bank refused you a loan and you want to know why? Thanks to the new provisions in the banking law, you no longer have to call the bank’s customer service and send a dozen or so emails asking for the justification for refusing a loan.
The amendment to the Banking Act imposes new obligations on banks that do not allow them to refuse a loan without giving a reason.
Does the bank provide information on why it refused to grant a loan?
New regulations in banking law. The bank must justify its refusal. Pursuant to the new regulations, banks and lending institutions must indicate which specific information about the client’s professional, financial or family situation has affected the negative assessment.
Information on the reasons for a refusal to grant a loan is free, which means that the bank may not charge any fee for its granting unless the entrepreneur is applying for a loan. The justification should be expressed specifically.
For example, if, for example, according to the customer’s bank, the installment cannot be repaid in a given amount, it should disclose in the justification all income and costs which it took into account. The new law says that every time you apply for an account limit, credit card, cash loan, etc., and even a quick loan, the bank must tell you why it doesn’t want to give you a loan.
The most common reasons for refusing a loan
There may be many reasons why a bank refuses to grant a loan, but different banks interpret events that are part of the customer’s credit history differently. In one bank, an event can completely exclude a loan, and in another, it is a second or tertiary element of creditworthiness assessment. Check what are the most common reasons why a bank may refuse you a loan.
You have no creditworthiness
The reason for the lack of creditworthiness is usually too high cash loan installments in relation to how much you earn. What does it mean, however, “too high installments”? That is, those that exceed 50% or 65% of your average monthly income.
Each bank has its own algorithm, according to which it grants scoring to persons who apply for a loan. The scoring is based on a set of data that each customer provides in the loan application. The key in scoring is, among others scoring in the Credit Information Bureau. It is very important what scoring you get from the bank because on its basis the bank will assign you to a given group of customers. This, in turn, will directly translate into the offer you will receive from the bank.
Delays in repayment of credit obligations
It may happen that if you repaid earlier obligations, you were late paying one or several installments. If it was the minimum delay – up to 30 days, this fact should not negatively affect the assessment of your credit history. However, if the delay has exceeded 30 days, the bank will interpret this event as negative, and hence will not grant you credit.
Source of income
The source of earning income – in fact – how you earn a living – is of great importance to the bank when considering your loan application.
Business and credit
People running a business are one of those customer groups that banks most often refuse to credit. Moreover, a large number of certificates and documents are required from these persons, which the bank thoroughly analyzes. To take a loan from a bank while having a business, you often need to hire an appropriate expert who will advise you on how to prove your credibility and “solvency” towards the bank.
A contract for the mandate and specific task and credit
Forms of employment that bank analysts also don’t trust are: mandate contract and contract for specific work. In the case of customers for whom such an agreement is the only source of income, banks grant a loan of max. for the duration of the contract.
Employment contract and credit
An employment contract is the most reliable form of employment for banks. What’s more, it is the persons employed under the employment contract that are the most numerous group of clients of financial institutions.
The best-rated by bank analysts is those customers who are employed under a contract of employment in the public sector or a company employing over 50 people. Unfortunately, some banks thoroughly scan such contracts and if, for example, your contract ends in a month or two, there is a great risk that you will be refused a loan from such a financial institution.
You are already paying back other loans
Many banks allow their customers to take mini loans with a few clicks from the level of electronic banking accounts. The speed and ease of taking a loan through a customer account are so high that you can lose count, how many loans have already been taken. 10 – 15 loans on the client’s account are reason enough for many banks to refuse a loan to the client. All because these banks have so-called commitment limit. Customers’ requests exceeding this limit are rejected immediately.
Banks most often grant loans to people aged 21-70. Of course, sometimes it happens that a client of the bank is a person outside this range, but these are sporadic cases. So there is a big risk for everyone who has just turned 18, as well as people aged 70+, that they will have to come to terms with the bank’s refusal to make a loan.