Many borrowers face a loan denial for lack of real estate secured loan information. If this happens to you it means that you do not have a mortgage and lack enough other credit history to get the loan. You may either have bad credit or no history.
- A mortgage is a real estate secured loan
- Secured loans are important because they show you can consistently make payment
- If the bank rejects your loan application work on building your credit history and scores with other lending options
If you are denied credit because you lack real estate secured loan information, it simply means that you do not have a mortgage
What is a Real Estate Secured Loan?
A mortgage is a real estate secured loan. For this type of loan, you put your house up as collateral. This means that if you do not make your monthly payments the bank can seize your house. It then sells it to recoup its investment. We call this process foreclosure.
Lenders consider these loans among the safest investments they can make. The reason is its guaranteed by a stable asset. Home prices usually do not fall very much. Also, you cannot move or hide the house. With a car, for instance, you can drive to another place and try to hide it. They further protect their investments by requiring appraisals and down payments.
Another reason banks like to see you have this type of loan is because it shows you can consistently pay back a large amount over a long period of time. Homeownership is the largest investment most people make in their lives. It shows good planning and responsibility. That is what lenders want to see when they make any other loans.
Why is a Real Estate Secured Loan Important for Your Credit?
Secured loans are important for credit for a few reasons. First, though, let us examine what makes a loan secured. What makes it secure is collateral. When you make this type of loan you pledge to give up something of value if you fail to repay the loan. IT can be a car, a bank account, an investment, and it can even be a piece of jewelry. The most important type of secured loan, though, is the mortgage. That is because it uses your home as collateral.
Why, then, are these types of loans so important for your credit? Lending Tree shows us three reasons:
- Banks lend more for these types of loans
- Lenders charge lower interest rates because they are less risky
- Banks approve these types of loans more readily because of the collateral
The bottom line is you can get a secured loan easier than you can get an unsecured. You can use them to build or repair your history.
What to do if You are Rejected
Credit.com points out that unfortunately, there is no quick fix for this. We do not recommend that you go buy a house just so banks will approve you for other loans. Many times, you may call the creditor and ask if there are other ways you can show that you are a serious and responsible borrower. They may have other options.
Other than that, you need to build your credit if you do not have any. Some good ways to do this are:
- Open a bank account
- Pay all of you bills on time, including your utilities, phone bill, etc.
- Get a secured credit card
If you need to repair your credit:
- Do not buy anything that is not necessary
- Pay off/down any loans that are in arears
- Pay off any unsecured loans as quickly as possible
While these are not quick fixes to credit problems, they are necessary. A little patience and you can build good credit and loans with better terms.
Final Thoughts About Denied for a Lack of Real Estate Secured Loan Information
If a lender turns down your application for a lack of real estate secured loan information, you should examine why this happened. It may be that you do not have any history and simply need to build it. On the other hand, you may have serious financial problems that you need to address. Either way, it may be for the best because you probably need to demonstrate that you can be responsible with your money.