What to do if the loan was rejected?

What criteria lead to loan rejection?

There are numerous reasons why a loan application does not lead to the desired success. These may be due in part to the general terms and conditions of the financial institutions or to legal regulations that stand in the way of a trustworthy granting of personal credit. A large proportion of financing requests are rejected as a result of a negative report from the Central Office for Credit Information (ZEK). This institution is the registry for creditworthiness information from credit transactions for legal entities as well as natural persons in Switzerland. Its main task is to protect its contractual partners from possible loan defaults. This is done by the respective bank transmitting the relevant data of the requesting customer to the ZEK in order to have his creditworthiness checked there.

If the information should turn out to the disadvantage of the consumer due to a bad payment record, this result often leads to a loan rejection. However, this decision also serves to protect him, as further loan instalments would place an additional burden on the strained household budget. In addition, there are other reasons why a reputable provider rejects the loan. Often, personal loans are denied when:

• the credit application is made during the probationary period, although a permanent employment contract exists
• the income is derived from a fixed-term employment relationship
• the income level is too low
• the applicant is too old or too young for a loan to be granted
• there are wage garnishments, open debt collection proceedings or certificates of loss
• the inquirer is self-employed and the start of self-employment was less than 24 months ago

The aforementioned reasons for refusal are largely due to the lack of collateral on the part of the consumer. Freelancers, the self-employed and employees with fixed-term employment contracts are generally unable to submit appropriate evidence of their stable income situation. As a result, banks assume that the risk of a loss of earnings is particularly high in their case. With regard to payment behaviour, in particular bookings by debt collection agencies, an overdrawn overdraft facility as well as return debit notes put the applicant in a bad light.

But the age of the bank customer is also of decisive importance: in order to enjoy a personal loan, the customer must be at least 18 years old. This age limit is prescribed by the legislator, since reaching the age of majority marks the entry into legal capacity. Similarly, a very high age can lead to the denial of the loan, since a full repayment is not guaranteed due to a higher probability of mortality.

How should you react if the loan was rejected?

Even if the bank does not approve your application, you are not doomed to inaction. First of all, you can contact the relevant financial institution and have the reasons for rejection explained to you. Only with this knowledge will you be able to look around for reputable alternatives.

Loan rejected due to negative information from ZEK

If this reason leads to a credit refusal, you can request a free self-disclosure from the Central Office for Credit Information. If, on receipt of the documents, you find that there are unjustified, negative entries and can prove this, you should request that the incorrect data be deleted immediately. Once removed, nothing stands in the way of a second request. However, if the note is justified, a conversation with the bank about further financing options may be useful.

Refusal due to insufficient income

Even if you work full time, your monthly earnings may be too low to qualify for a personal loan. Because the release is not dependent on the amount of the actual monthly income, but on that of the garnishable earnings. Decisive are the earnings, which are truly at your free disposal. To calculate this, the expenses are compared to the income. Thus, it can happen that due to already existing obligations or too high monthly expenses only a small residual income remains and this circumstance leads to the loan denial.

Reason for rejection Credit scoring

In this case, too, there is no need to despair. Since every financial institution works with different evaluation criteria in this context, you can make one or two more loan inquiries at other banks. However, to prevent further rejections, you should check with the respective financial institutions about their loan conditions in advance. However, you should not overdo it with the number of loan inquiries, as many loan refusals have a negative impact on your score.

Rejection due to lack of creditworthiness

If your credit rating is negative, you will not be able to obtain a personal loan. Visiting a debt counselling service is a sensible response here. It will help you to get your finances in order as well as to reduce the mountain of debt you may have.

Conclusion

Are you now unsure whether you would receive an installment loan from your house bank? Are you looking for a reputable and competent financial advisor with whom you can inquire about their conditions in advance without obligation? Then bestfinance.ch is the right place for you. Do our free credit check and within a few minutes you will receive the result. Or call us right now to get advice from our knowledgeable credit experts.

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