Saturday, December 29, 2007

Don't get angry. Negotiate.

There are very few things that can ruin someone's day more than a loan rejection. Whether it's for a small business, car or home it's pretty disheartening to be told that while it's nice that you'd very much like one, you're either too poor, too financially irresponsible, or not trustworthy. Because after all, if you're applying for a loan the chances are you really want something. Without it, it's likely not going to happen.

At this point this is where people get a little emotional and say somethings that are not very appropriate and professional. Maybe some of these words are directed to the loan officer. Or their mother. Which really isn't entirely fair. They're only doing their job. You're the one with the bad credit.

When it comes down to it, whether or not you succeed is a numbers game. They're only the face in front of the machine to make you feel more comfortable signing an extended contract with the bank.

But they are also there for another reason. They're there to negotiate should the need arise. While it's very unlikely they're looking out for your best interests it's always possible to reach a middle ground. Whether or not it's unfavorable for you is quite another story. But that's why you need to pay close attention.

Say the lender sits across from you and flat out tells you, in a deadpan voice:

"You've been rejected."

While it is evident that this individual lacks customer service skills, it doesn't mean they're always unwilling to work with you. Ask them why you've been rejected. Is it a simple income issue? Is it your over all debt? Or is a somewhat foggier issue, like you haven't been on the job quite long enough?

Here are a couple of compromises that you can put on the table should you find yourself in just that situation.

  • Get another employer: Would the loan officer be willing to bend a little bit more on your proposal if you obtained some extra monthly income?

  • Increase your down payment: Simply put, the larger your down payment the more likely it is you're going to get a loan that's favorable to your situation. So if getting another job isn't going to fly, offer a larger down payment. Use your second job to save up more money. See if you can borrow some from friends and family.

  • Borrow less: You've been rejected for a $250,000 home loan. Well, is it possible you can suck it up and find another home that may be a better deal? Would the bank be willing to lend you $200,000? Maybe $175,000?

  • Get your employer on your side: Are you being denied because of a perceived lack of job security? Depending on if that's true or not, get a letter from your employer stating your job security and future prospects if they're willing. If your filing for a loan with your significant other it may be a good idea to get one from their employer, too. Consider this a job interview, you want good references.

  • Spend less: Are you being rejected because you have too many existing loans out there? Can you deal without some of them? What if you sold your boat that you still owe $5,000 on? Can you sell it for $7,000 and use that cash to pay off the loan?

    What about your car? Can you trade it in for a less expensive model that'll lower your monthly payments?

If after all of this the final answer is still "no," don't be disheartened. If you're really set on obtaining your loan, visit another lender. And another if need be. Someone may look on your application with more favorable eyes.

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Perri said...

You wouldn't believe what a smile and a kind word can achieve. Great post!

Anonymous said...

you can often offer to refinance something like a car or boat instead of selling it.


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