“That stupid bank! I applied for loan and they simply reject it”, Clarisa frustrated because her loan application is rejected. She’s worried that she couldn’t get money to renovate her house as she planned. Now, she started to look around for other source of loans.
Many would have came through this, and they still confused of why their loan application is rejected. They believe that they are still eligible for the loan. They won’t give up and look for other source. Some would look for loan sharks. Some would get some third party agents. Worse thing is some people are not eligible at all and they knew it, and they use forged/fake documents to apply.
Let me tell you all something. The reason you get rejection is because there is a high chances that you won’t able to pay them promptly and risking of defaulting the loan. What does this mean? It means you have to re-evaluate your financial situation now.
If you take up the loan, the chances are high that you will end up in a deeper crisis than before. Here is a true story to prove my point.
"Peter (not his real name) doesn’t have a proper income. He wanted to get a second hand car for $10,000. He has been blacklisted by financial institute. But, he believes that by having the car he could do some business more effectively and could pay the loan promptly. So, he used his wife, Jane (not her real name) as the bait to get the car loan. Here is the worse thing. She’s a housewife. No income, nothing.
Peter got some help from his friend to get a fake payslips for his wife. Then, he applied the car loan under his wife’s name. He was proud of getting the loan. But, as time pass by, he started to default on his monthly payments. After a year or so, his car was repossessed. He tried to borrow some money from his friends and family and managed to get it. He got back his car. After a year or so, the same thing happens. He started to hide his car. Yet, the car was repossessed. Now, he has no money to get back his car.
The bank sold off the car in an auction and his wife name is blacklisted as there’s still balance of $3,000 to pay."
The moral of the story, don’t borrow or get loan when you are not eligible. You’ll just make you and your loved one suffer. Just look at the US sub-prime crisis. Why did it happen? It happened because of loosening of loan borrowing criteria. During the property boom, some of the financial institute started to give loans to people with history of bad records. As witnessed by everyone, it caused one of the biggest financial crisis in US histories.
So, when your loan application is rejected? It means something is wrong with your financial DNA. You have to sit down and find out why it is rejected. Is it because you have too many debts? Maybe your income requirement is not met? Perhaps, you have a history of bad payment? Or maybe it’s just no proper documentation.
Whatever it is, you must first stop complaining about it. Don’t try to look for other source of loan. When you are rejected, other loans would be worse for your financial health. Fix the root cause of your loan rejection.
If you have too many debts, settle them first. If you are planning to get a loan to settle your other loan, make sure your new loan offer better rates. Discuss with the bank on your plan to settle other loan. They might consider it.
If your income requirement not met, find a better paying job or take up a part time job. Or you could save some money so that you don’t have to take loans beyond your paying capability.
If you have a bad payment history, try to clear it by having at least 12 consecutive good payments, as your Central Credit Reference Information System (CCRIS) system only shows your past 12 months payment. Even thou you could just pay consecutively for 3 months and reapply, but it doesn’t mean your ‘payment due’ habit is taken care of. If your bad payment history was due to jobless issue you could show proof that you have found a job and negotiate with the bank.
Remember, your loan rejected because you are not financially sound and don’t try to get loans beyond your paying capability. You might have ‘hopes’ that you can pay them on time with your unrealistic plan, but those are just false hope. Be realistic.
Here’s another true story.
"Kevin (not his real name) was very enthusiastic when he bought his second hand Honda Civic. He managed to get a loan of $20,000. At first he tried to get the loan from banks, but his salary didn’t permit him one. So, he went to a credit institution and applied. They approved with a higher interest rate and one condition, he must have a guarantor to back him up. Since he is staying with his girlfriend, he asked her to be his guarantor. After few months paying, he started to default his payment. His girlfriend who is still studying at college had to help Kevin to pay it with her savings she saved from part time job.
Later on after almost a year, Kevin and his girlfriend break off and he couldn’t manage his financial matters. He starts to default again. Worse, he lost his job. The financial institute has to repossess the car. He was mad at it and went to argue with the staff. He ended up getting violence and arrested by the police. All this happened because he’s not qualified for the bank loan in the first place. The car got sold off at auction and whatever remaining balance has to be paid by the guarantor."
We could learn few things from here. First, the bank rejection already signaled that you will get into trouble if you get a loan. Secondly, don’t ever sign as a guarantor for a loan, especially if you are not rich enough. When financial institute asking for a guarantor, it shows the borrower’s income or history is not in good shape or didn’t meet the minimum requirement.
Some might be saying that they urgently need money; for renovation, for wedding, to buy car, to buy house, to modify car, to pamper yourself, for vacation and so on. But is it worth it to find alternate source of loan when your application rejected. Think of all the hardship and suffering. Think about thousand of people who have gone through the this.
Just delay your plan, and fix your financial leakage. Improve by learning better money management. Improve by getting a better income. Improve by fixing your bad history. Improve, improve and improve.
All in all, when your loan application rejected, it means something is wrong with your current financial situation. Fix it first before you re-apply and avoid using any shortcuts to get a loan. This is to ensure you of achieving your goals without any unnecessary risks.
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