Bridging the Loan Gap: How to Secure the Funds You Need

Getting a loan nowadays has become easier, but at times, the banks are not able to give you the entire amount you desire. This happens in all different forms, be it purchasing a house, a new business venture, or simple personal expenses. On the brighter side, though, there are ways to complement this shortage of funds and meet your needs in getting the excess funds you desire.

Also Read: Outlook Money's Exclusive Budget 2025 Coverage

Why the Banks Lend You Less Than You Need

Here are some reasons the bank might give a lower loan amount compared to what you have requested, these include:

1. Your Credit Score Isn't High Enough

The primary use of your credit score by banks is as an indicator that determines how much they can lend to you. In cases where the credit score is low, say less than 700, it may give an indication that you are a risky borrower, and so the bank will be reluctant to offer you a complete loan or reject your application.

2. Too Much Existing Debt

The banks also analyse your debt-to-income ratio. This is how much you owe compared to what you make. If too much of what you make goes toward paying for other loans, the bank will probably determine you cannot afford a larger loan and will give you less.

3. Lack of Collateral

For secured loans, for example, a home or car loan, the bank requires collateral or an asset of worth. If you do not have enough assets of worth to secure the loan, then the bank will lend you less.

4. Poor Purpose of Loan

The banks require knowledge about the exact purpose you have in mind for using the loan, particularly if it's for business purposes. If you cannot explain what you would use the money for or don't have a sound plan in place, they'll lend you less or may decline the loan entirely.

5. Economic Conditions or Bank Rules

Sometimes, economic conditions or the internal rules of the bank also limit how much they are willing to lend. If the economy is unstable or if the bank has certain lending restrictions, then the people may be very conservative about giving out large loans.

How to Bridge the Gap

If you have more money in mind than what the bank has offered, here are a few ways to get the funds you need:

1. Get a Co-Borrower

A co-borrower is the person who also applies for the loan with you and shares with you the repayment responsibility. A co-borrower with a better credit record can help if your credit record is not too great, enabling you to be approved for a larger loan. Remember that if you have a co-borrower, then both of you are liable, so you want to make sure you communicate properly.

2. Apply for a Top-Up Loan

If you already have an existing loan, some banks allow you to apply for a top-up loan, which is an additional loan on top of the original one. This can be a good option if you've been repaying the loan on time. However, be careful not to stretch your budget too thin by taking on extra debt.

3. Alternative Lenders

If the bank does not offer the amount you need for the loan, then consider searching for alternative lenders, such as non-banking financial companies, peer-to-peer lending platforms, etc. These institutions may have more relaxed criteria and could approve more significant loan amounts, though they might charge you a higher interest rate.

4. Use Collateral

If your credit is not strong enough to get a larger loan, consider offering collateral—like property, gold, or fixed deposits—so the bank has something to fall back on if you can't repay. Loans secured by collateral tend to have lower interest rates, and you might be able to borrow a larger sum.

5. Look for Government Schemes

For large loans, particularly for educational use, home development, or commencing business among others, it is always accompanied by a few government loan packages. In other words, certain government programs attract lower interest charges or make borrowing easier. Please find out how you may be eligible for assistance from government schemes.

If the bank cannot give you the amount of money you want to borrow, then you have a variety of choices. You can have a co-borrower, use collateral, or go to alternative lenders, among other things. However, you need to ensure that you are not going to put too much strain on your finances because you cannot pay the loan back in the long run.