Reasons why your loan application may be declined

Reasons why your loan application may be declined

Introduction

It is always disappointing if your loan application isn't accepted, but there is always a reason and we will do our best to explain why and help you take some action so that your next application will be successful. 
Firstly, we work for our Members, so if we are able to lend, then we will.
However we do need to comply with regulations to ensure that any loan is affordable for you, plus we must verify who you are, to ensure you aren't a victim of ID theft.
We do a money health check up as part of the loan decision and we will signpost if there are things you can do, or resources available that could help you manage your money well.
A loan may not be the best solution for your situation; if we know of any funding or support that might be available then we will tell you about it.  
All the money we lend are the savings of our 5500+ Members, so we are careful that we lend their money appropriately.  

  1. Low Disposable Income

This is the most common reason; we look at your income and expenses to make sure there is sufficient disposable income to pay your rent or mortgage, household bills and debt repayments.  

If there is low disposable income then that could mean you would struggle to repay a loan from Advance Credit Union. We don't want to put you in financial hardship and a loan may not be the right solution for you at this time.

            There are two things you can do; increase your income or reduce your expenditure. Here are a few suggestions:
  1. Increase your income:
    1. increase your work hours,
    2. take a part-time job.
    3. Are you claiming all the benefits you are entitled to? You might be surprised by what you're entitled to. The charity www.turn2us.org.uk has a benefits calculator that may help identify benefits you could claim. 
  2. Reduce your expenditure:
    1. can you get a better deal on your gas, electricity and other household bills?
    2. meal menus to reduce food waste.
    3. Are you paying for things you don't need? The Budget Planner on our website www.advancecu.org.uk can help. 
    4. If you have other loans, store cards or credit cards then it may be a good idea to clear those first, before borrowing again. 


  1. Expenses exceed income

Your loan may be rejected because your outgoings exceed your income. This means that it is unlikely that you could afford to repay a loan from Advance Credit Union. We suggest that you review your expenditure and reduce your outgoings where possible, for example using less gas and electricity, menus to reduce food waste. The Budget Planner on our website www.advancecu.org.uk can help. 

You should also consider ways to increase your income, for example could you increase your hours, take a part-time job. Are you claiming the benefits you are entitled to? The charity www.turn2us.org.uk has a benefits calculator that may help identify benefits you could claim. 


  1. Gambling

Gambling is ok as a leisure activity, but we may signpost if we see a high proportion of gambling transactions on bank statements. Excessive gambling can seriously affect family life, relationships, employment and your ability to borrow money. We would prefer to help you manage your money well before lending; a loan could make things worse for you. Find out more about our approach to gambling.

            There are lots of support organisations locally:

Aquarius is a local charity providing support and guidance on gambling. They can be contacted on 0121 414 0888 or online at aquarius.org.uk/gambling

            Rehab4Addiction has a list of resources that might be helpful. 

The charity Gamcare also operate the Freephone HelpLine 0808 8020 133 or online at www.gamcare.org.uk 


  1. Inadequate bank account information

We are required to ensure that the loan would be affordable for you so we do need to see your bank accounts shared via OpenBanking, or upload 3 months statements from all your bank accounts.  


  1. Debt 

Your loan might be refused if you have a number of other outstanding loans. This means that it is unlikely that you could afford to repay a loan from Advance Credit Union. We suggest that you pay off other debts before applying for a loan again. We may be able to provide a debt consolidation loan, if appropriate and cost effective for you.

We also suggest that you review your expenditure and reduce your outgoings where possible, for example using less gas and electricity, menus to reduce food waste, etc. The Budget Planner on our website www.advancecu.org.uk can help. 

The Money Advice Service's MoneyHelper website at https://www.moneyhelper.org.uk has advice on managing debts.


  1. Bank charges, overdraft fees

We don't often decline a loan application due to bank charges, but we may signpost if we can see you're paying regular overdraft fees or incurring several bank charges each month. That's your money that you are giving to your bank every month - this can be an indication that your money is not under control. 

We suggest that you contact your bank to check that these charges are legitimate and to discuss how you can reduce bank charges. If you ask, they may also be able to cancel some charges, particularly if they are causing you financial hardship, or they could change your account without fees. Can you make changes to your cashflow to avoid going into overdraft? You should also check your bank statements and report any transactions that you don’t think are correct. 


  1. Bank balance close to zero

Your bank statements indicate that your bank balance is frequently close to a nil balance. It is prudent to keep some money in your bank account. An unexpected bill or transaction could send your account into overdraft and fees could be applied to your account. 

You should also check your bank statements regularly and report any transactions that you don’t think are correct e.g. subscriptions you've cancelled, fraudulent or unauthorised transactions.  


  1. Overdraft

Your bank statements indicate that your bank balance is frequently in overdraft. An overdraft is intended for short term financial flexibility. Otherwise it is a very expensive way to borrow. It is prudent to keep at least a nominal sum in your bank account to ensure that overdraft/ returned bill payments/other charges are not applied to your account. 

You should also check your bank statements regularly and report any transactions that you don’t think are correct. 

We recommend reviewing your budget to ensure that you spend less than your income. The budget planner on our website can help www.advancecu.org.uk


  1. Payday Lenders

Your bank statements indicate that you use payday lenders. Borrowing from payday lenders is not a long term solution and can be very expensive with significant interest charges and fees, particularly if the debt extends more than 30 days. 

We recommend reviewing your budget to ensure that you spend less than your income, and clearing any outstanding payday loans. The budget planner on our website can help www.advancecu.org.uk


  1. Sub-Prime lenders and Retailers

Your bank statements might indicate that you use rent-to-own retailers, guarantor loans or other sub-prime lenders. These can be a very expensive way to purchase household items or borrow. A small weekly payment hides the true cost, frequently 3 times the value of the item purchased. These rent-to-own contracts are also hire-purchase; you don’t own the item until the item is paid off. 

Purchasing items second-hand, or using AdvanceCU’s Electrical loan may be better value for money.  


  1. Debt Collection Agencies

Your loan may be declined if you have existing arrangements with debt collection agencies. This suggests that it is unlikely that you could afford to repay a loan from Advance Credit Union. We suggest that you pay off other debts before applying for a loan again. 

We also suggest that you review your expenditure and reduce your outgoings where possible, for example using less gas and electricity, menus to reduce food waste, etc. The Budget Planner on our website www.advancecu.org.uk can help. 

Money Advice Service website at www.moneyadviceservice.org.uk has advice on managing debts.


12.      Loan balance not below £200

            Most Members can top-up their loan, but the outstanding loan balance must be £200 or less. Your loan application may be declined if your loan balance is more than £200. It is good money practice when borrowing to stick to the contract agreed, this also helps your credit history, demonstrating to other lenders that you can be trusted.  
We do usually increase this to £300 in the months before Christmas to give our Members a bit more financial flexibility at a time when many feel financial pressure.


  1. Nominal Payments on Bank Statement

Indicate that an agreement has been reached with a previous creditor.


  1. Non-Disclosure of Other Debts

You loan application may be rejected if you have not disclosed your other debts in your loan application. Being honest with us is really important and we do need to see all the relevant information. The AdvanceCU loan application form requires details of all other debts including payday loans, catalogues, etc. Non-disclosure is a breach of contract and could be construed as fraud. 

We suggest that you pay off other debts before applying for a loan again. 

We also suggest that you review your expenditure and reduce your outgoings where possible, for example using less gas and electricity, menus to reduce food waste, etc. The Budget Planner on our website www.advancecu.org.uk can help. 

Money Advice Service website at www.moneyadviceservice.org.uk has advice on managing debts.


  1. Bankrupt or Debt Relief Order (DRO)

If you are bankrupt or subject to a debt relief order then there are restrictions on your ability to borrow and we will not be permitted to lend to you. Find out more about DROs at StepChange.org


  1. Other members of the family/household Bad debt 

Your loan has not been accepted as other household members have outstanding debts which can affect your ability to repay a loan. We suggest that you talk to your household members to ensure that they are meeting their debt commitments. 

We recommend the budget planner on our website at www.advancecu.org.uk


  1. Inadequate or Inconsistent proof of ID

We are required by legislation to ensure that members of Advance Credit Union are who they say they are so we will not be able to process a loan application without seeing adequate proof of identity and proof of address.

You will need to provide us with the original (not a copy) of a government-issued document which incorporates your full name and photograph and either your residential address or your date of birth. Suitable ID includes: 

  1. Valid passport 
  2. Valid photocard driving licence (full or provisional) 
  3. National Identity card 
  4. Firearms certificate or shotgun licence 
  5. Identity card issued by the Electoral Office for Northern Ireland 

If you do not hold the above then two documents from the list below are required as evidence of ID:

Supported by a second document, either government-issued, or issued by a judicial authority, a public sector body or authority, a regulated utility company, or another FSA-regulated firm in the UK financial services sector, or in an equivalent jurisdiction, which incorporates:


your full name, 

and either 

your current residential address 

or

your date of birth. 


One document from each column:

Government-issued documents without a photograph include:

  1. Valid (old style) full UK driving licence

  2. Recent evidence of entitlement to a state or local authority-funded benefit (including housing benefit and council tax benefit), tax credit, pension, educational or other grant

Other documents include:

  1. Current council tax demand letter, or statement 

  2. Current bank statements, or credit/debit card statements, issued by a regulated financial sector firm in the UK, EU or an equivalent jurisdiction (but not ones printed off the internet)

  3. Utility bills (but not ones printed off the internet)

  4. Instrument of a court appointment (such as liquidator, or grant of probate)


If you do not hold any of the above then please contact us to discuss what other options you may have to join Advance Credit Union. 

  1. Proof of address not adequate

We are not able to process your application until we receive proof of your current residential address. You will need to provide us an official document dated within the last three months including your with current address. The following documents would be acceptable:

  1. council tax demand letter, or statement 

  2. Current bank statements, or credit/debit card statements, issued by a regulated financial sector firm in the UK, EU or an equivalent jurisdiction (but not ones printed off the internet)

  3. Utility bills (but not ones printed off the internet)

  4. Instrument of a court appointment (such as liquidator, or grant of probate) 



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