Why Personal Loans Are Different and Why You Cannot Get One

Have you recently tried to get a personal loan and found your application was not accepted? The reasons are many for your inability to obtain a personal loan but let me start with what a personal loan actually is.

Financial institutions for the convenience of borrowers have created personal loan products that generally have a lower interest rate than that of credit cards and a finite length of time to pay back. They are a better alternative to credit cards for this very reason.

Personal loans can be used for a broad range of purchases and may also be used to consolidate other existing debt and credit cards into one single payment at a lower interest rate.

Unlike other loan types personal loans are unsecured. This means that the lender will look at your credit history prior to considering offering you the finance you require. This can make it tough for some borrowers particularly if you do not have a credit history, that is, you have never borrowed money before or had a credit card or you have defaults or bankruptcies on your credit file.

Lets consider this example. You want to go on a holiday however, to obtain the funds for this holiday you would need to save for 5 years. You go to your chosen lender or advisor to arrange a personal loan so you can have the money now. The lender will consider a number of factors regarding your financial situation including what you are requiring the funds for. They will be tough in their decision making because if for some reason you default on your loan they will have nothing to sell to get the money back.

A common reason why personal loans are often not approved is because the borrower has made too many inquiries/applications recently. Every inquiry/application for funds is marked on your credit file and the more inquiries/applications you make the less chance of obtaining personal finance. The lenders see this as a negative because they will assume that you have not been successful in obtaining funds previously.

Do not confuse personal loans with car loans. They are two different kinds of loans. Car loans are often offered with a lower interest rate as they lender can use the car being purchased as security.

If you are uncertain about how to obtain a personal loan you should use a lending specialist. Lending specialists have personal relationships with lenders to ensure they get the right information from the borrower and can discuss the lending requirements on a personal level to the lender. It provides the best chance of a borrower obtaining funds. In saying this the lending specialist can only assist when the borrower is up front with the information they provide.

Personal loans are perceived as being easy to obtain but don’t be fooled by the marketing hype. With lenders tightening their lending policies they are much more difficult to obtain particularly if you try to do it without the help of a lending specialist.