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Why Banks Make it Hard to Obtain a Loan

Bank Of AmericaIt can sometimes be frustrating for new bank customers to obtain a loan from their bank, even if they have a strong credit score and income. The banking industry depends as much on relationships as it does financing, newer customers will often find themselves having difficulty obtaining loans beyond a minimum amount, or for a period of time longer than a few years. That being said, despite the bank’s general risk aversion when looking at newer clients, there are a number of ways for customers to make sure that they are approaching the bank in the best way possible, and therefore improve their chances of obtaining the amount and terms that they are looking for.

The most common restriction that newer customers will face when pursuing debt will be on the sheer amount of money that they will be allowed to borrow. Often times, banks will restrict new customers to borrowing minimum amounts, such as $5,000 for a personal loan, or as little as $500 for payday loans. Unfortunately, these amounts are not really enough to do anything with, and leave the customer without options simply because the bank is not willing to take the first step in building their relationship with the customer.

The trick to pushing the bank towards committing in this situation is to show strong borrowing traits, with an emphasis on your personal net worth. Net worth represents the funds the value that a borrower presents to the bank as a client, and will also support the bank’s decision to lend funds beyond a minimum amount. By presenting the lender with detailed information about the value of their entire financial position, including assets owned and savings accumulated. For example, a borrower might be able to demonstrate value as a customer through net worth by showing the bank that they own a variety of assets such as vehicles and equipment, which translates into an opportunity for the bank to become involved with the replacement of these assets over time.

Alternatively, a borrower can demonstrate value in light of a smaller amount of net worth by demonstrating that their limit assets are reasonably liquid, to the point at which they could be used to continue servicing the debts being issued in the event of financial hardship. By providing the bank with evidence that their asset base is at least semi-accessible, they are providing some assurance that they are a less risky prospect than they would otherwise appear to be, which might be enough to push the bank towards committing to a larger loan.

Lastly, a borrower can encourage a bank to take them seriously as a new borrower by carrying a variety of products with that particular institution. Banks will tend to favor customers that have a variety of products held in their institution because it shows a commitment from the customer to doing business. Sometimes a borrower can encourage a banker to improve their offer by simply bundling their loan with another product, such as a savings account or some kind of investment on the side.

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