Tag: finance

Reasons Why Banks Reject Applications For Loans In The UK

If you have ever applied for a loan from a bank or some other credit facility in the UK, chances are you did it with a fair amount of trepidation. The reason is simple, despite the good odds borrowers are given by loan facilities in the UK, very few people actually get to access the loans, and this is because a lot of the applications get rejected if they do not meet certain criteria. This post details some of the reasons why banks reject applications for loans in the UK.

The bank doesn’t think you can pay back

This is the first and usually the most common reason why banks reject loans in the UK. For any credit facility to hand out money to you, they need to be sure you will pay back the sum and at when due. If for any reason the bank determines you will be unable to repay, rather than risk losing their money, they will rather refuse to give you the loan.

Your presentation was not convincing

No matter how good your facts and figures are on paper, you are going to need to convince a bank manager or loan manager to give you that loan. Loan managers are human beings and need to be convinced. If you are unable to convince them and instead end up alienating them with a terrible presentation, it is very likely your application will be rejected.

Your business plan was not convincing

Conversely, even if your presentation rocked the charts and wowed the panel or the bank manager, if the facts and figures you have on paper are not rocking those same charts, then the chances are high that your application will be denied and the opportunity given to someone else. The reason for this is simple; banks are not charity organizations. They need to be sure that by giving you this loan you will turn in a profit in your business or whatever it is you are applying for and this will result in a profit for them too.

Your business is too risky

The reason why banks are more likely to hand out student loans than business loans is because it is a less risky venture. As a rule, banks in the UK avoid risky ventures and if your reason for applying for the loan is too risky, the bank will likely not grant you that loan.

The underlying reason why banks reject certain applications has to do with profit. If the application is not deemed worthy of turning up profit for the bank, it will be rejected no matter how well it is presented. However, this does not mean that if your loan application is rejected it is the end of the world. You should go back to your drawing board and redraft the application. It is always possible to succeed when you try again. Remember, the banks want to make profits too.