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Noamx
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01 Oct 2022, 4:38 am

Well basically, this time I'd like to talk to you about the Bank refusing to give me a Loan.

Can you explain why this is happening? I've been a good customer and I have an income. The income isnt high, but there is still income. They keep refusing to give me a Loan, and they dont really explain why, they always just bring up some strange excuses like "you are not eligible", without explaining why I'm not eligible.

Do you think I need to go talk to the bank manager?

Other than that, I was hoping if you can please explain what you think about all this, specifically about Loans and so on, thanks.


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r00tb33r
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01 Oct 2022, 4:50 am

There are usually published eligibility requirements.

In US we have a credit reporting system that grades you as a borrower.

Then there's the debt to income ratio, and how long you've had your income. Income that has tax records is easier to prove and is less scrutinized.

What information did you provide to apply for this loan, and what type of loan is it?


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Noamx
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01 Oct 2022, 4:54 am

r00tb33r wrote:
There are usually published eligibility requirements.

In US we have a credit reporting system that grades you as a borrower.

Then there's the debt to income ratio, and how long you've had your income. Income that has tax records is easier to prove and is less scrutinized.

What information did you provide to apply for this loan, and what type of loan is it?

Loan for renting apartment, buying a used car, buy new TV< and so on...

I provided basic info like what my income is, paychecks. Is Paychecks not enough for a Loan, man?


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r00tb33r
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01 Oct 2022, 5:11 am

Noamx wrote:
r00tb33r wrote:
There are usually published eligibility requirements.

In US we have a credit reporting system that grades you as a borrower.

Then there's the debt to income ratio, and how long you've had your income. Income that has tax records is easier to prove and is less scrutinized.

What information did you provide to apply for this loan, and what type of loan is it?

Loan for renting apartment, buying a used car, buy new TV< and so on...

I provided basic info like what my income is, paychecks. Is Paychecks not enough for a Loan, man?

Let's use an example, a (used) car like you mentioned. Loans are a form of investment, the lender (the bank) expects to profit from your loan in the form of interest (%). Likewise the lender will do their best to protect their investment in the event if you fail to fulfill the terms (fail to pay), which means they will ask for proof of having auto insurance, for example, as they have to make sure they will be able to recover much of the investment, even if you wreck the car. Because if you didn't have insurance, and the car was destroyed you won't have any motivation to continue paying.

So as you can see it would take more than a paycheck to get such a loan.


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goldfish21
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01 Oct 2022, 8:59 am

Noamx wrote:
r00tb33r wrote:
There are usually published eligibility requirements.

In US we have a credit reporting system that grades you as a borrower.

Then there's the debt to income ratio, and how long you've had your income. Income that has tax records is easier to prove and is less scrutinized.

What information did you provide to apply for this loan, and what type of loan is it?

Loan for renting apartment, buying a used car, buy new TV< and so on...

I provided basic info like what my income is, paychecks. Is Paychecks not enough for a Loan, man?


Bank loans aren't typically given for renting an apartment. There's no collateral for the bank to seize and sell if you don't repay the loan. It's possible some people might take out a personal loan to cover rent or moving costs etc, but this would only happen if they have a good credit rating and high enough income for the bank to justify loaning them money to spend on whatever they feel like and know that the client has enough income to easily repay it. Personal loans come with higher interest costs than mortgages or new car loans to account for the risk of not having an asset to seize and sell should the customer not pay.

It's difficult to get a bank loan for a used car, too. Banks know they can seize and resell a new car, but a used car? Much more difficult to know what it's worth and to sell it etc. It's possible for someone with great credit and income to get a personal loan to buy a used car, but the interest rates are fairly high.

Bank loans aren't given to buy new tv's. A new TV is instantly worth less than someone paid, and it's value drops quickly. When people finance TV's they typically would do so through some finance promotion offer through the store's banking partner and then pay a ridiculously high interest rate on it. Other than that, someone might just buy it on a credit card and make payments - with high interest - to the credit card company until it's paid off.


Basically none of the things you're seeking a loan for qualify for loans, typically. And simply having a paycheque isn't necessarily enough to qualify for a personal loan. Maybe your income isn't high enough, maybe you haven't worked there for long enough, maybe your expenses and other debts are too high leaving you with too little to be able to make the payments on the size of personal loan you'd need etc.

It seems that rather than explain all of these things and more to you the bank just concisely summed things up with 'You are ineligible,' in order to save time and not have to engage you on a long conversation about these basics. Still, they should take the 5-10 minutes to at least explain things to you once in full. I think it'd be professional of them to have done so.


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Radish
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01 Oct 2022, 9:16 am

Banks tend to work on the principal that if you are well off and don't need a loan they will keep offering you loans as you are a good bet for paying it off and the bank earning interest. If you aren't well off and need a loan they aren't inclined to give you one as you are more of a risk and less likely to pay it back.

So the solution is simple. Become wealthy, then the banks will offer you lots of loans. :|


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DanielW
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01 Oct 2022, 9:24 am

Income is only a small part of judging a person's credit worthiness. You also need a good credit history. As has been said, you need a reason for a loan that is acceptable to the lender. Using it for rent? That a "red-flag" because it implies you cant afford to pay for your shelter, making you a risk for not re-paying the loan.



Noamx
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01 Oct 2022, 12:15 pm

Thanks for all the helpful information / advice guys, I appreciate it. I've read all your replies. There's something else I also wanted to ask you about, related to this.

Well basically, if you can share that(you dont have to, but I'd appreciate it if you do so), can you share what bank do you have an account in in your country, what is the bank's name, bank's site, and how easy/hard was it to receive a Loan from that bank? If you can share the bank's name or site, I can go read about it and learn more, I wasnt able to find specifically from Google search. I doubt I can open a bank account of a bank in a different country if I live in Israel, but I might temporarily move / visit the US/UK soon, so thats why.

Hope you can help me with that, thanks.

Other than that, I understand paychecks arent enough like one of you guys stated. But can you explain generally what does banks generally think about Paychecks, are they worth something, are they a good indication, good sign, etc.? Or Paychecks used to be important in the past, but not much so anymore today(or atleast, thats how I understand it...but please correct me if I'm wrong).


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Radish
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01 Oct 2022, 12:25 pm

Noamx wrote:
what does banks generally think about Paychecks, are they worth something, are they a good indication, good sign, etc.?


You must have regular paychecks / income plus have a good credit rating. Income alone means nothing as someone could just be squandering it all and running up debts. Lenders look at your credit record to see if you are paying bills on time. Also don't ask for a loan to pay rent... that is just a cost of living, it will raise a red flag that your income already doesn't meet your needs so you won't be able to pay back a loan. Loans tend to be for tangible items that the lender could take off you if you fail to repay the loan, things like a car.

I'll just add that most lenders will only lend to people who are permanently resident in the same country as the lender otherwise you'd be a flight risk. They will need proof of residence, possibly for several years. I believe three years minimum is typical in the UK.


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Radish
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01 Oct 2022, 12:56 pm

Also... The lower your credit rating the higher the rate of interest you'll have to pay. The rate could be massive if you have a low credit score. Another option you could consider would be asking a relative or a good friend to act as a "guarantor". That means that if you fail to pay the loan back they will have to pay it back on your behalf... but beware, lenders will be ruthless regarding this... if you don't pay it back, bailiffs / debt collectors will turn up at the guarantor's door and if they can't pay it off they will seize their belongings to sell at auction to repay your debt, so you could become extremely unpopular with your guarantor!


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Fireblossom
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01 Oct 2022, 1:34 pm

To add to everything else already said: where I come from, banks are required by the law to do a stress test on anyone trying to get a loan, which means that they need to check if the customer could handle the loan even if the interest rate came up to a certain level (currently the test level is 6%.) If the customer can't handle an interest that high, they can't get the loan. Maybe something like that is also a thing where you're from?



kraftiekortie
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01 Oct 2022, 8:26 pm

If you have credit cards, and pay them off every month, without fail, for at least a year, you would stand a better chance of getting a loan.

If you seem desperate for a loan, you will almost always get denied.



r00tb33r
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01 Oct 2022, 9:34 pm

kraftiekortie wrote:
If you have credit cards, and pay them off every month, without fail, for at least a year, you would stand a better chance of getting a loan.

If you seem desperate for a loan, you will almost always get denied.

I don't know if Israel has a similar credit reporting system.

Buying a TV for example, many stores offer financing, even with zero interest for a period. Or pay for it with your credit card and deal with the installments and interest that way. Personally I think a TV is a pretty useless thing, I have cars and a house but don't have a TV.

What goldfish said about rent, but here we have "payday loans", they're run by loan sharks, not banks. Beyond that I don't know anything about them. I heard they're bad for credit ratings, but that may or may not be true.

Borrowing is not a good habit to develop, live within your means. That said, a credit card is a form of a loan, so chances are you're already carrying one in your wallet.

Honestly, the bank, if it's legitimate, should give you a list of documents to provide, or you can research that yourself.

Myself, the only loan I have is for the house, and that's a very difficult process.

I had a tuition loan back when I was in college but my parents and the financial officer at the school helped fill that out, so I don't remember much. I paid that off 10 years ago.

I think a credit card would be a good starting point for you, but recognize that there could be better financing options for things you buy.


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