NEW YORK (MainStreet) – It’s no shame to be turned down for a loan, but it just might be a shame to shrug your shoulders and give up. In actuality, you can revisit a rejected loan and get the money – but you'll need to take a few steps first.
Before we line up some tips, know that banks are turning down more loan requests these days.
According to The Wall Street Journal, the 10 largest banks in the U.S. rejected 26.8% of mortgage loan applications in 2010 – that’s up from 23.5% in 2009.
Another study from Pepperdine University found that banks had denied 60% of small business loan requests in the first half of 2011.
So with those odds stacked against borrowers, what steps can you take after your bank loan has been denied?
It’s really about keeping your emotions in check and getting a good game plan together. In general, the best medicine to take after a loan rejection is to get informed, know your credit situation, and open up a line of dialogue with your lender.
Here are some specific tips to get that process rolling:
- Contact your lender and ask for details on why your loan was rejected. The information they provide will give you a heads-up on what you need to do to fix the problem and get your loan approved.
- Focus on your problem.Loan applications are turned down for myriad reasons. Credit issues, divorce, loss of a job or ill health are at the top of the list of reasons why loans are rejected. Find out what your specific problem is and focus on fixing it.
- Check your credit status. When you’re rejected for a loan it usually all comes back to your credit report, which is why obtaining a copy of your credit report is mandatory. When you get it, look for incorrect entries, accounts that aren’t yours, or outdated information. If you find these errors, write the credit report agency and ask them to update your files.
- Reach out to your creditors. Most creditors will remove negative credit data if you make a full or partial payment toward the debt.
- Emphasize the good news. Check and see that the credit bureau has all the information that shows your stability and ability to make payments on time. For example, if you have long-term employment, make sure that fact is added to your credit file.
- Emphasize your good name. Often people who are married have one spouse with serious financial problems. If so, make sure you establish credit in your name alone
- Take advantage of a second chance. Even though you’ve had some credit woes, you may be able to resurrect your good financial name by getting a new credit card, obtaining a secured loan or working with a local store to obtain credit on a purchase.
- Pay up. There’s no way to avoid it – if you have unpaid accounts listed against your credit history, you have to pay them back. Start paying regularly in any amount and work up from there.
- Don’t panic. Keep cool and begin collecting the key financial data you need to change your rejected loan into an approved loan. You may not realize after having a loan denied, but turning the tables on a bad loan situation isn’t the uphill climb you might think.