Fear of the declined loan        

Wrong. In lending these days a no is another step closer to a yes. The key is to remember that there are dozens of lenders out there. All these lenders need to write loans so that they make money. There is no point having a drawer full of money if it doesn’t make a return for them. They need to lend it in order to get more market share, which leads them to what’s called a ‘policy niche’ that differentiates them from the others. That one bit of policy that sets them apart from the other lenders.

Let’s for example say you have been searching the internet for the cheapest loan, you apply and it comes back with the reply declined ‘does not adhere to our lending guidelines’, or words to that effect.

Most of the time people will accept this and think ‘oh well it wasn’t to be’. WRONG. First of all find out why, you may have miss entering something or forgotten to add some income or deposit. There could be many reasons.  Second, do some more research talk to some lenders first, get a feel for what their policy is, what they will and won’t accept. Talk to them about your situation and they may be able to accommodate a little bit of variance.

All lenders have the ability to think outside the normal lending guidelines, but they need to get to know you first and that’s why they ask for your statements and history. If there are signs its good then they will try and give you a go.

If you discover that you have a default, there are actually things you can do about it. You can accept the decline and wait for the default to fall off your credit report. They are there for 5 years from when they are listed to when they fall off. They can also be removed through credit repair agencies.

Try this option because we have had luck with these over the years. I personally recommend CRAZY limits on credit cards. I’m talking over 50k to 75k and they are not using anymore than 5k per month. When you broach the subject they always reply that it’s there “just in case”. In case of what.. you need a new Merc… at 21% really….

These limits accrue over time especially when they used to post out letters upping peoples’ limits automatically. It didn’t take long if you were a good payer for these limits to evolve.

The key then is to drop the limit down to something more manageable, say to 10k. This will impact you servicing massively. It can improve your servicing by approx. $3k per month.

Other reasons for declines can often be due to the valuation, especially 2^nd hand units. There are also other title types that lenders don’t like such as leases, which are long-term to a state of federal governments over long periods of time. They are difficult to get approval on, especially from the non-bank lenders.

Previous history is often another reason. If you have arrears that appear on your statement, then new lenders are very shy of these. This is where the non-conforming lenders are better. If you can get over to a non-conforming lender and get 12 months of good steady repayments, then you are better off paying a bit more in interest for 12 months, get some good history and move to a 1^st tier lender.

Remember a no is another step closer to a yes, but you must not give up, keep talking to lenders. Also go to a good broker who has a lot of experience. I have seen a lot of people get looked after as the broker gets paid on settlement. They are motivated to lend, not sit back and accept a decline. They will also go into bat for you and get the loan across the line.