My loan was rejected – tips, reasons and alternatives

Credit rejected

There is hardly anything worse for a loan seeker than the rejection of his credit. A negative credit decision, and a rejected loan often destroy the dreams of the loan seeker. Whatever it was about financing, whether it was an installment loan without earmarking, the financing of a new car, or the purchase of a home, a great desire is nullified by the cancellation. The rejection of credit is a setback that often leaves potential borrowers in the sand. But it should not be too long in this rigid attitude, instead, should be started with the search for possible alternatives for the rejected loan.

The bank rejects the application for the loan, because there is a negative Private credit. Since this is generally the case with German banks, a loan without a Private credit query offers no possibility.
Another alternative to a loan from a bank is personal loans.
While banks often have very tight credit check and credit rating criteria, the creditend and trucredit credit markets have a wider range of options. However, a Private credit query also takes place here.

1. The loan was rejected – why, the bank usually says

While the rejection of account openings often without comment, this looks different for loans. The bank on which a loan was requested often makes it clear why a loan request was rejected in the event of a negative credit decision. However, the reasons for the rejection can be very different. For example, every bank in Germany must submit a request to Private credit when a loan is requested. As a rule, this request is placed directly in the first position within the framework of loan processing.

For the bank lending is excluded in case of negative Private credit. For this reason, the bank will not go one step further in loan processing, but send the credit rejection.

In addition to the question about the Private credit, the credit rating of the banks, however, contains even more points. These are relevant to lending, and can also lead to a rejection of the loan application, even if the Private credit statement does not provide any negative features. The credit rating of the bank is an internal scoring, in which the income of the borrower flows, and the marital status. In addition, data on the employment contract and the employer, the place of residence, and other socio-economic data are important from the bank’s perspective for lending.

This applies both to the conventional installment loan and to the instant loan. It can also come to a rejection of the credit request, if the scoring result is too low overall. After all, the score value also flows into the credit rating of the bank when applying for a loan.

However, what is important is that the banks do a uniform query at the Private credit, but the credit ratings themselves are made different. Thus, the scoring methods of credit institutions are sometimes very different. If a borrower has a top credit rating, this is of course less important, since then the best conditions for a loan apply anyway. This includes a Private credit without blemish, an indefinite employment relationship in a company that is classified as crisis-proof, and an apartment or a house in a residential area with a generally good score. The situation is different, however, if the various points which are included in the assessment of creditworthiness are weighted very differently depending on the bank. Then it may be that one bank may not lend at all, even though there is no negative rating, but the scoring results do not match what the bank would like to see. However, a loan application can not be rejected if, in the bank’s opinion, the loan amount requested is too high to cover the installments with the monthly income of the household.

It may then be helpful to go directly to the bank and ask which budget expenditure might be canceled. This is important to ensure that the loan installment for the desired loan can also be paid. However, if a negative entry in the Private credit was the reason for the credit rejection, a free loan can be a way to still be able to take out a loan. But again, of course, the monthly household income has to be high enough to cover the loan installments. However, there may be other reasons why the loan request was rejected. This may be a fixed-term employment relationship with a shorter working life than the term of the loan. Even within the probationary period, even with a permanent employment relationship, no borrowing is possible.

2. Loans from private to private and self-employed – a competition for the banks

The two credit marketplaces creditend and trucredit have become big competitors for the banks. In addition to loans from private individuals to private individuals, creditend has also included direct loans from banks, thereby simultaneously becoming a credit comparison platform.

The basic principle of both credit marketplaces is quite simple: the potential borrowers place their loan request anonymously on one of the two platforms. They describe their loan application in a project form. These projects are viewed by interested investors who are looking for a good investment opportunity, where they get good conditions for their money. Investors then decide whether they want to invest in the project. If you invest money there, this also happens anonymously. Settlement takes place completely via the respective credit platform, from the project planning, over the complete lending, as well as the possible collection, and the disbursement of the invested money including interest to the investors.

You can find various loan applications on creditend and trucredit. Among them, requests from individuals, the self-employed and freelancers whose loan application was denied at one or more banks, for very different reasons. Others, on the other hand, are looking for a loan directly through one of these platforms, because they are free to set up their projects and finance them if they are able to attract donors. In addition, creditend now offers cheap direct loans, which are provided by banks, without the need to hire a project for online credit comparison. But it is important: a credit check is also carried out on these credit platforms, information about the Private credit takes place in any case.

Nevertheless, potential borrowers whose loan application has been rejected by a bank because of its Private credit information are still able to obtain credit through creditend and aumoney. Although this does not apply to the so-called hard Private credit characteristics, it is also clear from the credit platforms that there is no loan. However, for such privately-held privately owned platforms, there are several credit rating levels. The higher the level, the higher the risk for the lenders of such loan projects, but also the return. Therefore, it is quite possible, via trucredit or creditend to hire the loan as a project, and to hope that it will find several investors who want to invest despite the higher risk. In such cases, the borrower must, of course, also be prepared to accept higher interest rates. Otherwise, all that remains for him is credit to Private credit, where he may even be charged even higher interest rates.

In the meantime, there is another provider in Germany for the credit marketplaces, Lendico. The comparatively young startup in the field of FinTech industry wants to make loans possible across Europe. The concept of Lendico is very similar to that of trucredit and creditend. With the repayment term, only six months are possible, which very much accommodates the apparent increase in demand for short-term loans. At Lendico, as with the other two credit platforms, a credit check is mandatory. This protects all investors from too high a risk.

The other great advantage of such loan platforms: they also offer small and medium-sized companies the opportunity to take out a loan. If you find investors, they will receive the required loan accordingly. This offers companies of all kinds, traditional, only a short time on the market, or even in the start-up phase, the possibility to take out a loan.

In this area, banks are often far more skeptical and often reluctant to lend money. This is despite the fact that the European Central Bank has long since lowered the bank’s main refinancing rate to 0.00 per cent so that corporate loans are increasingly being lent. Nevertheless, especially in the first few months and years, there is often no opportunity to obtain adequate funding. For credit markets, this is possible if companies succeed in making themselves attractive to private investors.

Banks are often much more biased about lending to start-ups. Loan applications can therefore often be realized via such credit marketplaces, which are directly rejected by lending banks from the outset. Since private investors decide how they want to invest their money through creditend, trucredit and Lendico, there are many more opportunities for small and medium-sized enterprises. The same applies to the self-employed and freelancers, who often have the disadvantage of banks, if they want to take out a loan. Above all, it is important to have an attractive presentation of the project so that potential investors also feel addressed.

3. A guarantor can help with a loan application

If the credit rating of the bank is negative, because the creditworthiness of the borrower seems too weak, a loan guarantee can be the solution. In this case, it is helpful to go to the bank that has refused the loan for that reason and to list a guarantor. The borrower whose loan application has previously been rejected can bring with him the necessary security through the guarantor who signs the credit agreement.

If the borrower fails because he can no longer pay the installments due to his poor credit rating, the guarantor will replace him and pay the loan. However, this should only happen in the case where the borrower is in fact unable to service the loan installments. Otherwise, a surety can quickly become the end of a friendship, or the breaking of a kinship relationship.

When selecting the guarantor, it is important that he has the corresponding positive credit rating. At the same time, this offers the possibility of obtaining a loan on better terms than would be possible with a loan without guarantee, such as a loan in spite of Private credit. Before the guarantee, and the signature under the loan agreement, clear agreements are recommended. This is important so that the guarantor does not end up with the loan alone and has to repay someone else’s debt for months or even years. For example, for students who may not get a loan without a guarantor due to lack of enough income, parents can take over the loan guarantee.

For borrowers who do not have a guarantor at hand, but anyway need only a small loan, also offers the mini loan. Depending on the provider for such short-term loans different high loan amounts are possible. The terms can be 15, 30, 45 or 60 days, depending on the conditions of the respective mini-loan provider. For a guarantee, there may be better interest rates, depending on whether the short-term loan is concluded with a fixed interest rate for all, or with an individual interest rate, according to the creditworthiness of the borrower.

Short-term loans can, depending on the provider, also be taken up by self-employed, freelancers, housewives and students. Even for migrants such loans are sometimes possible, insofar as they can demonstrate a permanent residence here in Germany.
A Private credit query is made according to the mini-credit provider. With negative characteristics in the Private credit it depends on the kind of the entries. Not every negative feature automatically leads to the rejection of an application for a short-term loan.
The loan request is also, depending on the provider, Private credit-neutral. This means that neither an inquiry nor a loan will be entered in the Private credit information.

This also means that such loans can be considered as an alternative to the installment loan depending on the reason for rejecting the loan application from a bank. 

4. Is a mortgage loan actually an alternative to bank credit?

An alternative, if all other credit options fail, is a so-called mortgage loan. With this type of loan, it is possible to bring valuables to a pawnbroker and to take out such a loan there. How much money the pawnshop gives depends on the respective pledge, its value, and the possibility of auctioning at the end of the pledge period. Since the pledge serves as collateral for such a loan, the borrower does not incur debts in the usual sense. A Private credit query is also not.

However, the interest on this type of loan is not very low. Therefore, it is recommended to use such a loan for a limited time, and if a serious financial shortage can not be solved in another way. If the property is not redeemed after a certain period of time, which can be three months or six months, it will be auctioned off. If the auction proceeds exceed the loan amount received, including fees and interest, the former owner will be credited the difference. However, due to the high cost, a mortgage loan should only be the last resort if money can not be raised anywhere else!

5. Conclusion

If the loan application was rejected by the bank, this is no reason to bury your head in the sand. Depending on the rejection by the credit institution, and its reason, there are several alternatives that offer off-bank to potential borrowers. This can be a credit marketplace loan, a Private credit loan, or a mini loan.

Not always, the negative credit rating of the bank is synonymous with the potential credit out of other providers. Through loan platforms such as trucredit, creditend and Lendico, there is often the possibility of hiring credit application projects to find potential financiers. This is usually rejected by the credit marketplaces only if the entries in the Private credit are hard negative features such as a bankruptcy.

If the credit rating is too weak, a guarantor can improve the chances of a loan and a better credit rating. A credit guarantee wants to be well discussed in advance, however, and clarified.

To get a loan today, there is more and more opportunity. A refusal from a bank often does not mean that there is no credit at all. The various banks sometimes work with very different credit ratings, which can make a loan possible, even though the loan request was rejected elsewhere.

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