Borrowers’ Red Flags That Moneylenders Avoid the Most

Nowadays, access to fast cash is made easier thanks to money lenders. An authorised money lender provides some financial relief, especially during emergencies. However, a money lender knows that not everyone applying for a loan should be approved, especially when they show tell-tale signs of financial irresponsibility or instability.

5 Red Flags That Repel Money Lenders

Money lenders have safeguards that protect them from abusive and irresponsible borrowers. One of these is identifying borrower red flags, like the following:

1. A History of Default or Bankruptcy

Money lenders typically do a background check before approving loans. They examine credit scores and bank statements to see if the borrower can afford monthly repayments.

Money lenders tend to avoid borrowers with a history of default or bankruptcy. These records show a borrower’s reliability to make prompt payments and not default on loans.

2. Inconsistent or Incomplete Financial Information

Another thing a money lender, like a licensed Ang Mo Kio money lender, looks at is a person’s financial status. Inconsistencies or incomplete information about income, jobs, or assets raise warning signs to lenders.

3. High Debt-to-Income Ratio

A debt-to-income ratio determines borrowing risk. Lenders use this to see if a loan application is high-risk. This number is calculated by dividing one’s monthly debt by one’s monthly income. A higher ratio means a significant chunk of your income goes to debt repayments. Money lenders prefer those who have manageable debt levels.

4. Aggressive Borrowing Behavior

While borrowing money is a way out of a sudden financial emergency, lenders frown upon impulsive and frequent borrowing. Taking out multiple loans without a clear repayment plan or structure suggests financial irresponsibility and potential headaches for lenders.

Most lenders tend to avoid dealing with those who rely heavily on loans.

5. Employment Instability

Job stability is one of the main things a money lender looks at. It shows a borrower’s capacity to make monthly payments and manage debt responsibly. A steady income source increases a borrower’s chances of getting approved for a loan.

On the flip side, frequent employment changes reflect unreliability in making long-term monthly loan repayments. Borrowers who can make consistent loan repayments have better chances of getting approved than those who habitually hop from one job to another.

Why Responsible Borrowing Matters

Borrowing money may be inevitable to many folks and money lenders are there to meet them at the point of their needs. However, just because lenders are willing to help doesn’t mean borrowers should take advantage of them. As already mentioned, money lenders favor responsible borrowers when approving loan applications.

How do you do that?

• Work on a budget and stick to it.
• Live within your means.
• Be financially literate.
• Avoid unnecessary debt.
• Automate recurring payments, including loan repayments.

Easier said than done, we know. But if you keep working at these things and build good financial habits, money and debt management will be easier which increases your chances of getting a loan in the future should you need one.

Wrapping It Up

Understanding money lender’s red flags will help you increase your chances of getting a loan approval, should the need arise. The important thing is you replace bad financial habits with healthy ones so you can manage your money and debt better.