Credit union loans serve to support personal and business financial strategies. It is frustrating if you don't qualify for the expected financial support after applying. Here are some of the reasons your loan application can be denied and how to fix the problems.
1. You Have a Low Credit Score
Credit unions have their minimum credit score requirement for their loan application. If your credit score doesn't attain the minimum threshold, your loan application won't go through.
Before applying for the loan, you can build your credit score by taking a credit builder loan, paying down your credit card, and paying your current debt repayments on time. Set a standing order or have a routine/schedule for your debt repayments to avoid making late repayments.
Also, you can check out if the credit union you're sending your application to can work out a deal for your loan despite having a bad credit score.
2. You Have Missing Documentation
Missing documentation or verifications is a common mistake people make while applying for loans. Therefore, you should countercheck and ensure that the required documents and information are well-stipulated in the application form.
3. You Don't Meet the Basic State's Requirements
The credit union must observe the state's minimum requirements. Some of these requirements include being at least 18 years old at the time of application and providing a government-provided identification such as a passport, state-issued ID, or driver's license. This identification helps to reduce theft and fraud in the loan application and disbursement.
Meeting these requirements beforehand eases the application process. Since the credit union will also need proof that you can pay back their loan, most of them will verify your source of income through bank statements or tax returns.
4. You Have a Debt-to-Income Ratio
The debt-to-income ratio is the ratio of your monthly debt to your income as a percentage. It calculates how much of your current income goes to loan repayments. The union can fairly assess if you can handle an additional loan repayment expense from this calculation. Credit unions set a standard DTI for all applications for you to qualify for a loan; a higher value will have your loan application denied.
To increase your prospects, you need to look for ways to improve your income or reduce your debt. These options will reduce the DTI ratio, thus increasing your approval chances.
The documentation needed for the loan application process can be lengthy and bureaucratic. But with accurate detailing and processing, you'll get the financial support requested.Share