Reasons for refusing the loan
If the loan is declined, applicants often cannot understand the bank’s decision and are disappointed. For example, the granting of installment loans has nothing to do with luck: if the bank refuses the loan, it has valid reasons for doing so. For the most part, this is because the applicant cannot provide enough collateral for the loan. However, poor payment behavior in the past also forces the bank to refuse the loan.
The conditions for obtaining an installment loan are set out in the general terms and conditions of each bank. But legal requirements also ensure that only borrowers who can service the loan receive a loan. The aim is to protect consumers from potential debt on the one hand and to protect the bank from possible loan defaults on the other.
But what are the specific reasons why a loan is rejected? First of all, there is no one answer to this question, since every bank can determine its own lending within the legal framework. In principle, there can be only two reasons why your loan was rejected: your credit rating or your age. Both reasons speak out quickly and easily, but some of them are complex.
Reason for rejection: creditworthiness
The term credit rating is the summary of a borrower’s creditworthiness. The creditworthiness is determined by various factors that enable banks and savings banks to see how likely it is that the borrower will actually be able to pay his installments. The worse your credit rating is rated by a bank, the more likely your loan will be rejected. In the following we would like to explain to you which factors influence your credit rating.
The employment relationship
- Employees & civil servants : Employees and civil servants generally have the best chances of getting an installment loan because their income is regular and mostly secure. In these cases, the bank can therefore assume that payment in installments is hardly a problem for this target group.
- Employees in the probationary period : It looks different if you have a permanent job but have only recently started it – so you are still in the probationary period. Since a lot can happen during the trial period and there is only a two-week notice period, employees in the trial period are not particularly cheap borrowers from the bank’s perspective. But that doesn’t mean that your loan will be rejected. It is probably more a question of how much credit you need. You will probably get a loan during the probationary period at slightly worse interest rates than a permanent employee.
- Self-employed & freelancers : People with irregular income have far worse cards. Banks only grant loans for the self-employed and freelancers after a very thorough examination. For a self-employed person and freelancer, for example, they need the documentation on their income from the past three years. This is the only way the bank can get a concrete overview of the income situation. However, self-employment is not a reason why your loan was or should be rejected. Only start-ups have almost no chance of getting a loan.
- Students : Unfortunately, students in need of money are twice as poor. “Normal” banks rarely give students a loan. Students are probably dependent on the support of their parents when it comes to a classic installment loan. Students can apply for special student loans through the Kreditanstalt für Wiederaufbau (KfW).
The amount of income
Another aspect that can be critical that your loan has been or may be declined is the amount of your income. The amount of credit you need should not exceed your financial options. The bank does not want you or yourself to get into debt and scrape every cent over years to pay the installments.