Refused a loan

We understand how you may be feeling right now, but to be honest, you are not alone in today’s financial environment. Since the ‘Credit Crunch’, lenders have really tightened their lending criteria and unless your credit record is virtually squeaky clean, you’re unlikely to pass their credit score, particularly if you are not a homeowner.

• Do you dread opening your mail?
• Have you been refused an overdraft?
• Have you been refused a loan?

If so please call 08448 247 260. We understand that if you’ve been refused a loan because of a bad credit record or CCJs, it can lead to embarrassment.

If you’ve been refused a loan by other lenders because of bad credit you can still speak to us at National Money for alternative debt help.

What to do if you’ve been refused a loan to clear debt

If you’ve been refused a loan to clear your debts or outstanding credit, or you’re worried that you might be, you can check the information that is recorded about you. If you find this is incorrect, and can prove this, you can ask for it to be corrected. If the information is correct and you’re worried about your debts you can get free help.

How lenders decide who they should lend to

When you apply for a loan or credit, lenders want to know that you are going to be able to repay any money they lend you. The two key ways they usually assess this are:

• Work out your ‘credit score’ by asking you a series of questions on the application form
• Check your ‘credit history’ with a credit reference agency

Credit scoring if you have been refused loans to clear debt

To work out your credit score lenders ask you for details of:

• Your income – wages, benefits etc
• Your living expenses
• Major assets you own – like your home, car, investments etc
• Any other loans or financial commitments you have to cover

Each of your answers is allocated points according to the lender’s market experience and ‘risk’ factors. If you do not score enough points, they may:

• Offer to lend you a smaller amount
• Charge you a higher rate of interest
• Refuse to give you a loan

A lender will not usually tell you why you have been refused a loan but they may give you a general idea if you ask them.

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Can you ask them to reconsider if you have been refused loans to clear debt?

You can ask them to reconsider if:

• They made their decision just using a computerised credit scoring system
• You’ve got ‘material’ information that might make them change their mind

Applications to different lenders to clear debts (Debt Consolidation)

Lenders score customers in different ways, so you can try again with another lender who could take a different view of your suitability. However, you should bear in mind that each application will be noted on your credit file kept by credit reference agencies, and these can affect your credit record. Some lenders may interpret large numbers of applications as a risk factor when assessing your application.

Too many refused applications will have a negative effect on your credit history.

Credit reference agencies

Credit reference agencies hold information (called a ‘credit history’) on most adults in the UK. This information is used widely by lenders to help them assess the risk of lending to particular people, and reduce the risk of fraud. The main agencies are Experian, Equifax and CallCredit.

To put together your credit history the credit reference agencies gather information from several sources, including:

• The electoral register
• Register of County Court judgments
• Bankruptcy orders
• Other lenders – to check that you’ve kept up to date with other loan repayments
• Details of house repossessions

You have a right to check your credit file if you have been refused loans to clear debt. You cannot stop lenders checking your credit file as you will have authorised them to do so as part of the application process, but the law says you can see what is recorded on it. There is a fee payable to do this, but credit reference agencies cannot charge more than £2 for this – you may also be able to see your file online, but this may cost more.

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What are your options if you have been refused a loan, or refused loans to clear debt?

If you have been refused a loan, your debt problems may well be a primary reason, and you may need to take debt advice with a view to sorting these out in a different way. If you have a partner, we would always recommend that you let your partner know that you’ve been refused a loan by other lenders and that’s why you’re looking into the alternatives.

It’s natural to feel that the straightforward solution to debt problems is to borrow more money, consolidate these debts and pay this off over an extended period. It may be a surprise to learn that debt consolidation loans tend not to be particularly effective in addressing debt problems, and many who opt for this route end up in more debt!

Here are a few options to consider as an alternative to borrowing more money

Individual Voluntary Arrangement (IVA)

If you have been refused credit or loans and are a UK resident, you can still clear debt with an IVA. An IVA is a legal agreement with creditors (usually non-priority creditors) to repay your debts over an agreed, fixed period of time. This could either fully repay these debts or, with agreement from the creditors (see below), with a partial write off of the debts.

The arrangement is negotiated, written up and checked regularly by an independent solicitor or accountant called an Insolvency Practitioner.

Not all the creditors have to agree to an IVA; as long as the creditors to whom you owe 75% or more of your debt agree, the rest of the creditors are tied to the agreement. An IVA is a legally binding method for help with debts if refused a loan in the UK.

Debt Management Plan (DMP)

A debt management plan is an informal arrangement (not legally binding) with your creditors to pay back the debt by regular instalments, and is based upon the amount you can afford to pay each month. Instead of you speaking to your creditors yourself to arrange the plan, the administrator of the DMP does it for you, which removes a lot of the worry and stress associated with calls and letters from lenders.

A debt management plan is structured method for help with debts if refused a loan in the UK.

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Bankruptcy

Bankruptcy is a Court Order for which you can apply if you are in debt and cannot afford to make any repayments to the debts. Once you have been made bankrupt, you don’t have to deal with the people you owe money to (your creditors).

An official called the Official Receiver takes control of your money and property, and deals with your creditors.

Bankruptcy is a government scheme for help with debts if refused a loan in the UK.

There are important matters to consider seriously before taking this route, and you need to take professional advice – call us to discuss further on 08448 247 260

Secured Debt Consolidation Loans

If you are a homeowner and you have equity in your property a secured loan may be a viable option. However, like applications for any borrowing, your application will be assessed on the basis of your credit file. Whilst the lender will take comfort from having your house as security for the loan, they will not lend simply because of this security and will have to be convinced that you can afford to make the repayments. You will need to provide proof of regular income either with payslips or a P60, or if you are self employed, you will need to provide at least 3 years’ trading accounts of your business to show your income.

We recognise that being refused a loan because of a bad credit record or CCJs, it can lead to embarrassment. It can also lead to great concern and you may not know what else you can do to sort out your debt worries.

If you’ve been refused a loan before, there are other ways to solve the problem, and with our help, you’ll be delighted at how easy it is to apply for help.

National Money is one of the UK’s leading providers of confidential and non-judgmental debt advice on serious debt problems. We know how you may be feeling right now.

Do you dread opening your mail? Have you been refused an overdraft? Have you been refused a loan?

If so please call 08448 247 260 to get debt free

…or Request a callback and one of our friendly team members will call you back at a suitable time.

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