Turned Down for a Personal Loan? Here’s What to do

Where you turned down for a personal loan? – Courtesy photo / Mark Moz (CC BY 2.0)

It is not uncommon to have a personal loan denied, for whatever reason. This can be a big blow to personal finances especially if you’re in dire need of the money. Rather than sit back and feel sorry, you can try out some of these proven steps to get a loan approval. It is possible to reverse the denial and improve your credit history with a few easy steps

Finding out why the loan was denied is the most important step when trying to reverse the lender’s decision. It also helps you to grasp the loan application process, understand why it was denied, and what you can do to avoid the situation.

Step 1: Find Out the Cause of Denial

Some reasons that influence approval and may make a lender turn down your loan application have quick solutions such as:

  • Renegotiating for a different rate if the initial application was out of your income bracket.
  • You can also opt to apply for a loan that is specifically targeted at low-to-moderate incomes.

Common Reasons Why a Lender Might Deny a Personal Loan

  • Bad Credit

All lenders will consider your borrowing and repayment history when analyzing your credit score. Evidence of borrowing and timely repayment improves your score significantly. If you do not have sufficient borrowing history or failed to make payments on past bad credit loans from service like Nation 21, this will result in a poor credit score and reduced approval chances.


There is no solution to immediately building up your credit score. However, you can start by borrowing small amounts and repaying on time. Gradually increase these amounts to start building an impressive credit score that will raise your chances of qualification for future loans.

  • You Applied for a High Amount

Most banks will assess your ability to make timely repayments with reasonable ease. If expenses are higher than income, giving you the loan is a financial risk to the bank. This means that your chances of defaulting or being unable to make timely loan repayments are high.


You need to prove reliability to the lender and the ability to make the required monthly repayments. In some cases, such as home loans, make use of an online loan calculator to try and find out how much you are eligible for.

It is also possible to renegotiate and apply for a smaller loan that you can comfortably repay.

  • Unstable Employment Record

You must convince lenders that you are able to comfortably make payments to completion. Having a temporary job or a history of changing jobs too often puts your ability to repay the loan in doubt. Some lenders have a specific minimum tenure requirement which is indicated on your employment certificate.

  • You do not Meet Minimum Requirements

Some personal loans have restrictions such as minimum age, residency criteria, and other specifications. A lender may deny a loan if the applicant is not at their current address for the required length of time it takes to qualify.

Steps to Take if You are Denied a Personal Loan

It’s important to go through the reasons why your personal loan application was turned down in order to give you an idea of what to correct when reapplying. These steps will help you improve your creditworthiness.

In addition, they can also guide you on how to navigate the loan application process if the denial was not credit-related.

Step 2: Get a Copy of Your Credit Report

You can get a free copy of your credit report, annually, from any of the three nationwide credit reporting companies: Equifax, Experian, and TransUnion.

Sometimes, the cause of denial might not be credit-score related. Some errors such as a canceled account or fraudulent collections can cause the lender to turn down your application. Thankfully, these are easy to fix.

Billing errors such as failure of a creditor to mail a bill to a new address resulting in late payment can easily be rectified also. Creditors can deal with this error if you notify them of an address change 20 days before the billing period ends.

Reporting these errors to the relevant authorities, such as the credit reporting agency, as soon as you find out about them will go a long way towards solving your case. It will also help clear any errors if you need loan services in the future. You are also required to send a notification letter to all agencies where the error occurred.

The credit reporting agency is required by law, under the Fair Billing Act, to investigate all reported errors promptly, at no charge. The creditor who first misidentified the problem is required to remove and fix it.

Step 3: Get a Second Opinion

After carrying out investigations and amending any errors on your credit report, the credit agency sends a corrected copy to the lender. Follow up with your lender and ask to talk to the immediate superior in the loan reviews department if necessary.

Lending criteria also vary for different lenders. Try seeking a different option using a soft search option to avoid taking hits on your credit score. A soft search allows lenders to see your information, but they will be unable to access any credit information.

Step 4: Take Some Time to Work on Your Finances and Credit Score

Consider taking some time to work on your finances and improve your credit score before reapplying. Pay off debts and address structural issues causing you financial problems. This increases the chances of loan approval in the future.

You can work on improving your credit score at this time by:

  • Creating a budget: A budget will help you reduce your spending and improve on savings. This improves your creditworthiness by eliminating unnecessary debt. It also lowers financial risk for the lenders.
  • Pay all debts on time: Try to make on-time payments. This reduces spending on late fees and shows lenders you are creditworthy.
  • Pay off credit cards and loans: Use existent loans and credits cards before opening new accounts and borrowing more money. Too many loans and credit cards show financial irresponsibility and are usually a red flag for lenders, indicating financial troubles.
  • Increase your income: Although this may be difficult to achieve, it is a major factor when lenders go through your loan application. Major life changes are best put off at this point until you build a plan to pay off all your debt.

Step 5: Try Another Lender

Different credit lenders have different lending guidelines. Once you identify and rectify the reasons that caused your loan denial, approach another lender.

One instance of denial should not discourage you. Chances are there is another lender with different lending criteria who might approve your loan. With a little work, you can find a match.


Do not lose hope when one lender turns down your personal loan application. You can always try again at the same lender after addressing inhibiting factors or move to another lender altogether. Follow these proven steps today to improve your chances of approval for the loan you need.

March 7, 2019

About Author

Sierra Madre Weekly

Leave a Reply

Your email address will not be published. Required fields are marked *

E-Newsletter Sign-up!

May 2019
« Apr