As a consequence of the pandemic crisis, many people have to face expenses for which their income is insufficient. Faced with this situation, in order to meet their objectives, they must go into debt and in many cases resort to personal loans.
But sometimes acquiring a loan can become an impossible task. At the time of the request, the banks evaluate the applicant’s profile and based on that information they decide to accept or reject the credit request. In that sense, it will be as important to be aware of the requirements to apply as the reasons why a loan can be denied.
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However, beforehand, it will also be necessary to know in detail what type of commitment is being assumed and to evaluate the possible risks well in order to avoid over-indebtedness.
What is a Personal Loan?
It is a sum of money that an entity or person gives to another in exchange for a certain price, which is normally established through the payment of the initial capital plus interest (that is, the initial amount lent plus what is charged for lending) distributed over a given period of time.
The person or entity that lends the money is called the lender and the one who receives the loan is called the borrower. The amount of the loan is called capital (or principal), which will be repaid in one or several payments (periodic payments).
The repayment of the loan (amortization) is normally carried out through the payment of regular installments (monthly, quarterly or semi-annually) over an agreed period. Each installment usually includes part of the initial loaned capital and the previously agreed interests.
What are the most common mistakes when applying for a personal loan?
- Ask for more than is needed. There is a misconception that the more, the better. A personal loan is a responsibility that must be paid with interest and commissions, within a certain period. And the less you request, the less you have to repay and, therefore, the less time you will be in debt, so it is convenient to only ask for what is needed for a justified reason.
- Choose a very long-term loan, to pay smaller installments. In reality, in the long run you will be paying more for the loan in interest, plus you will be in debt for a long time. It is necessary to be realistic and think about the possible term in which the installments can be returned without entailing an economic difficulty.
- Not being informed about the existence of products linked to the loan. This usually happens with bank loans, where the granting of aid sometimes requires contracting other products such as a debit card, an insurance policy or a pension plan.
- Not comparing similar products for the same term to see which may be more profitable is another of the most common mistakes when taking out a loan.
- If the loan contemplates the possibility of an early, partial or total cancellation, it is convenient to know what its cost is. In the case of total pre-cancellation, the application of commissions will not be accepted when at least a quarter of the initial term of the financing has elapsed or 180 calendar days from its granting, whichever is greater.
- All the conditions reported by the financial institution at the time of offering the loan must appear in the contract. It is important to review it carefully in order to avoid sacrificing the requirements on the clauses that the client is not aware of.
What are the reasons why the application for a personal loan can be rejected?
According to the BCRA, to apply for a loan you must be between 18 and 74 years old, have an Argentine or resident ID. But what can be the reasons when the request is denied:
- High Level of Indebtedness: Financial entities examine the profile of the applicant and one of the variables they focus on is the amount of debts that the person accumulates. With this information it is possible to know what is the degree and the level of compliance in the installments for the possible new credit.
- Poor Credit History: Possibly the most important point. If the applicant accumulates too many defaults, it may be more difficult for him to achieve his goal. The way to counteract this negative data in the history itself is to regularize the credit with punctual payments, preferably with payments higher than the minimum.
- Impossibility of Proving Income: Entities and companies that offer personal loans also analyze the applicant’s income level. If, despite having a good record, you do not have enough income to assume the debt, it will not be granted. It could also happen that you do not have the necessary receipts to be able to demonstrate more income. In that case, if you receive money in cash, it should be deposited in a bank account. In this way, a profit record is created that will give more financing possibilities.
- Irregularities in the Application: Irregularities (false or unverifiable data) in the forms may be a reason to reject the request. Therefore, it is essential to be honest when completing this application.
- Seniority in the Job: This requirement may vary depending on the job status of the applicant and the demands made by the bank. In general, the requirement ranges between 3 months, one year and up to two years of work seniority. In any case, there are other options on the market that can be evaluated for unemployed people, housewives, students and retirees. In this sense, from Banco Ciudad they informed Clarin that currently the possibilities of being able to access a personal loan are greater than the impossibilities.
Appearing in the Truthful for unpaid debts, or having defaults in the financial system are the most exclusive. But from the entity they explained that, for example, in the case of not qualifying with regard to the fee-income relationship, what can be done is to adjust the amount to which they aspire so that this relationship is possible, but in no way mode will be entirely restrictive.