When a business owner is trying to secure sufficient funds to make investments in their business, loan rejection can be extremely damaging.
Access to investment opportunities, as well as readily available cash, is ideal for business fruition. A number of small and medium-sized enterprises (SMEs) are reliant on banks and other financial institutions for business loans. It is worth noting, however, that there is a conscious shift away from traditional institutions and toward financial technology platforms FINTECH.
That’s correct. A new wave of lending platforms, other than banks, is sweeping the industry.
It is relatively simple to apply for instant loan at any of Nigeria’s commercial banks or other lending institutions.
However, the success of your online loan application is not guaranteed because it is dependent on a number of factors. A loan application may be denied for a variety of reasons, which we will go over with you so that you can eliminate them and increase your chances of getting a loan.
What are the top five most common reasons why your online loan application may be denied?
Among the most common reasons are:
Bad Credit History Leading to Online Loan Application Rejection
Credit Score history? What even does that mean? An applicant’s credit history is a record of all the prior loans they have obtained. It also considers an examination of the loan’s repayment process. At this point, one of the first things a lender does is look at your credit history. Before issuing another loan, the lender will need to know how many loans you currently have, so doing this task gives them that information.
Because many Nigerians, especially beginners, may not be familiar with the tactic, this idea might seem strange. It is important to note that the credit score is a key factor in determining whether your application will be approved. Ideally, when application for loan is declined without reason, it is advised that you check your credit history to be sure that you do not have any defaulted loans.
Knowing your credit score before apply for instant loan will tell you if you have bad credit or none at all. If this is the case, you can be certain that your loan application will be denied because you are too risky. You can learn more about credit score in Nigeria and what it entails by visiting this page.
Incorrect or insufficient collateral
Knowing your credit score before applying for a loan will tell you if you have bad credit or none at all. If this is the case, you can be certain that your loan application will be denied because you are too risky. You can learn more about credit score in Nigeria and what it entails by visiting this page.
In this situation, what should you do? Make a collateral document that lists everything you can use as collateral. Because the former may not have the equipment to offer as collateral, you can include both business and personal assets. Following that, you may be required to offer your home or vehicle as collateral.
Loan Rejection Due to Over-Indebtedness
The applicant’s salary, account balance, or account statement do not automatically justify loan approval. Rejection or denial of loan may be due to the applicant’s outstanding loans. That’s right: A lender can tell if an applicant has multiple loans open at the same time. The lender is making a risk-management decision, and they may not be willing to take any chances. It’s actually a no-no.
As previously stated, lending platforms are in the business of disbursing loans in order to generate profits for themselves. Based on your application, you may discover that your company does not have the ability to repay them. An application may be denied in this light. This is not to encourage the use of bogus proposals in your business. No way are you going to try that.
The simple message is that if you loan apply that are deemed too large for you or your company, the proposal may be rejected.
Flimsy Business Plan or Proposal
If you present a weak business proposal, investors are unlikely to take your online loan application into account. Here is a straightforward rule of thumb to follow to guarantee your loan will be approved after submission: Do your business plan’s thoroughness and explicitness justice. This gives the impression to potential investors that you have done research or that you are familiar with your target market. Additionally, it shows that you have a well-defined mission statement with objectives in mind and includes a calculated projection of sales and profit.
In addition to your plan, the report advised that you also make sure your resume, personal background information, financial statements, bank statements, income tax returns, and legal documents like articles of incorporation are ready.
All of these reasons may be unclear to an applicant at the time of rejection because they were not expected criteria. However, if they are important to lenders in determining whether or not to issue a loan, a borrower should consider the lenders before apply for instant loan.
When applying for a loan, it is critical that you do your research. Failure to provide accurate information about yourself when applying on platforms such as Branch Loan may result in rejection. Keeping track of trends can also help you stay on top of recent developments.
If you discover that there may be complications at any point, you should postpone your application until a later date. You can also look for other lending platforms.
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