by Ben Sweiry ·
Modified on 28 December, 2022
- Yes, you can cancel a loan application.
- It is best if you cancel within 24 hours, in order to avoid any penalty fees.
- Some lenders give you a two-week ‘cooling-off’ period, which is 14 days within signing all your credit agreements. However, you may be subject to some penalty fees, which can increase the longer you take to cancel your application.
- If you decide that you need to cancel your loan application, the best thing to do is to contact your lender ASAP who you can make the necessary arrangements with.
When Can I Cancel My Loan Application?
Our lenders understand that circumstances can change. You may feel that you no longer need your loan, or perhaps you’ll change your mind and decide that a loan isn’t the right solution for you.
Our lenders will usually always be happy to cancel your application with little-to-no fee if it you take action within 24 hours of applying and signing off your forms.
Under the Consumer Credit Act 1974 you have the right to cancel your loan on these 2 grounds;
- Your application has been made but hasn’t been approved yet and you haven’t signed a credit agreement.
- You have signed your credit agreement and are still within the 14-day cooling-off period. This period starts from the moment you sign your credit agreement.
You can cancel your loan in the 2-week ‘cooling-off’ period, but some lenders will have to charge penalty fees in this instance.
Why Would I Cancel a Loan After Approval?
Borrowers may sometimes have second thoughts about their loan applications for various reasons. It is important to note that regardless of the loan type, whether you apply for a payday loan, cash advance or installment loan, it’s always better to weigh all the pros and cons before you apply.
Reasons for loan application cancellation may be different. You might decide to cancel for one of the following reasons;
- A new financial scheme from the government that benefits you;
- You suddenly receive a significant monetary gift from friends or relatives;
- Loss of your current employment;
- Inability to repay the final loan cost;
- Disagreement with the loan terms that the lender provides.
Whatever the reason is, it is essential that you cancel your application as soon as possible – preferably even before you receive money into your bank account.
In most cases, you can simply contact your lender to make the necessary arrangements. However, the longer you leave it to cancel, the higher any potential penalty fees will be.
Does Cancelling a Loan Application Affect Your Credit Score?
When you first apply for your loan, Dime Alley will only run a soft credit check which does not show up on your credit report. However, your lender may decide to run a hard credit check to see if you will be able to repay your loan, based on your credit score, previous debt and current income.
If you cancel an applications after your lender has made a credit inquiry could have a negative impact on your credit score. Lenders will see the multiple applications on your credit history whether you cancel them or not – which can raise alarm bells when applying for future financial products.
What To Consider Before Cancelling a Loan Application?
Cancelling your loan is a big decision and there are several things you need to take into account beforehand. If you’re in the cooling-off period, you should consider whether cancelling your loan or making an early settlement is the best option for you.
As already mentioned, cancelling your loan during your cooling-off period won’t remove the footprint from your credit report, and you may be subject to some penalty fees for early cancellation.
Before you decide to cancel, it is important that you speak to your lender. Ask them for the total amount you need to pay in order to cancel or clear the loan – this is called an ‘early settlement figure’. The lender must include all interest and charges you’ll need to pay.