I Need a Loan but Keep Getting Declined

Jul 2, 2024

Why Are Loans Rejected?

Lenders frequently deny loan applications because they mistrust your ability to repay the desired amount. They often mention your credit report as the primary reason for rejection. Overdue payments or participation with debt collectors indicate financial difficulties, which supports their decision not to grant your loan. Furthermore, lenders may reject your application if they believe it will result in considerable financial strain given your income, savings, expenditures, and existing debts. If you find yourself thinking, “I need a loan but keep getting declined” for loans from banks or private lenders, you need to figure out why.

Raise your chances of acceptance in the future by being aware of the factors that affect your chances for getting a loan. Continue reading to learn about the most common causes for loan rejection and how to improve your chances of getting approved.

7 reasons why you may have been denied a personal loan

Your application may be declined for a variety of reasons. Lenders are required to explain why. They must provide you an action notification within 30 days of refusal. This notification will explain the reasoning for their choice. Some of the most common reasons include:

  • Low credit score
  • High debt-to-income ratio
  • Insufficient or uncertain income
  • Excessive loan request
  • Failure to meet basic application requirements
  • Incorrect or incomplete application
  • The purpose of the loan does not meet lender’s criteria

What should you do if you need a loan but keep getting declined?

If you are seeking for a loan but facing rejection, these ten steps can help you get it:

Apply for a smaller, secured loan

Use collateral for your loan, such as a car, or a property, to reduce risk. Analyse all available possibilities before making a decision.

Investigate government incentives

Check for discounts and grants provided by the Australian government. Business owners may be eligible for grants to cover expenses.

Consider charity and no-interest loans (NILs)

No interest loans are appropriate for people with low incomes; some are issued by your local government, while many others are provided by charities. Understand their specific use requirements in order to cut down your possibilities, as these loans typically have certain usage conditions and restrictions.

Use a guarantor loan

A guarantor with a solid credit score can help you get your application approved. However, before asking someone to be your guarantor, make sure both sides understand the dangers, as the guarantor is accountable if you default.

Talk with a loan broker

If you have been turned down for a personal loan, a car loan, or any type of financing, consider speaking with a loan broker. They can examine your financial situation and provide guidance on obtaining a loan quickly or increasing your eligibility for future applications.

Apply for a bad credit loan

If your credit rating is the reason your application was denied, a bad credit loan may be appropriate. These loans have fewer approval requirements than other varieties, but they frequently come with higher interest rates.

Improve your credit report

If you have missed payments because of a late paycheck or a transaction challenge, you should request a copy of your credit report. If you have any other outstanding amounts, you can call the company and ask if they can place you on another payment plan that will make your payments easier.

Manage your debts

Make on-time payments. If you have any outstanding balances, contact your creditors to negotiate easier payment options. If you made a couple of additional payments here and there, it would appear that things are starting to get better, and you might even obtain a new loan.

Consolidate your debts

Instead of making multiple payments to different creditors, you will make just one payment. Lower interest rates and easier payback terms are two benefits of consolidating debt into a single payment. It won’t pay off your debt, but you will ultimately make fewer payments overall.

Budget wisely

You will need to analyse your expenses and see if some of them may be reduced. Assess your spending habits and consider minimising costs, such as switching to a cheaper internet package or cutting back on dining out. 

How to increase your chances of being approved for a personal loan

In this section, we will go over how you can work to improve your chances of acceptance. The following are some common strategies for increasing your creditworthiness.

Take some time

If you don’t need money right away, work on improving your financial situation over time. Request information from the lender regarding why your application was denied. This will help you identify areas to work on and let your credit score get fixed.

Control expenditure

Lower your expenses if you are spending too much of your income. Discover methods to save money in Australia. Take into account solar energy and energy-efficient equipment to save money.

Use credit cards carefully

Lenders desire a low credit utilisation rate, which means you are not using all of your available credit, such as credit cards or lines of credit. This also helps to reduce your debt-to-income ratio by lowering the amount of debt you have in terms of your income.

Maintain job stability

You need to be sure that you have been earning a consistent salary from the same employer for several months. Frequent job changes or unpredictable income can lower your chances of loan acceptance. If your current income is insufficient, seek extra revenue sources, but make sure they are verifiable.


Consider prequalifying for a loan to determine your eligibility based on the lender’s standards. Many lenders provide prequalification checks without affecting your credit score. It is beneficial to look into lenders who offer this option in order to learn more about your loan options.

Pay on time

Timely payments have a big impact on your credit score. Keep yourself safe by meeting payback deadlines. If your position changes, contact your lender right away to explore a substitute payment arrangement.

Catch up on missed payments

Prioritise settling any missed payments. Lenders want to know that you can handle both present and future financial debts. Debt consolidation might help you avoid missing payments.

Create credit history

If you are new to credit, you may not have much history yet. Some lenders make loans to people with no credit history, but most want to have a track record of careful credit management over time before giving credit.

Improve your debt-to-income ratio (DTI)

If your loan application was rejected due to your debt-to-income ratio, you primarily have two alternatives for improvement: raising your income or reducing your debt, or you can go for both.

Choose a realistic loan amount

You can begin with a smaller loan amount. Your monthly income, and your ability to repay the loan are going to determine the amount you can ask for. Analyse various payment situations and choose an amount that fits comfortably within your budget.

How much does a declined loan affect your credit score?

Loan denials have no direct impact on your credit score or credit history. When you apply for a loan, lenders conduct a ‘hard enquiry’ that has an impact on your credit score. These enquiries occur when a lender reviews your credit report to determine your suitability and creditworthiness.

You should have a decent amount of confidence in approval before applying, and avoid submitting many applications at once. Repeated applications with denials can lower your credit score and make future approvals more difficult. Although your credit score will eventually improve, it may take some time.

Final Word

If your loan applications have been turned down time and time again, you need to know why. In this blog post, we discussed the reasons of loan application rejections and provided actionable methods to improve your chances of acceptance. You can take these steps to increase your chances of getting a loan and start working towards a better financial situation.

B M Peachey

B M Peachey, has over 15 years of experience investing in property and the stock market, in both New Zealand and Australia. She has a post-graduate degree, with qualifications in Finance and Mortgage Broking and in Accounting and Bookkeeping. She is passionate about ensuring people have access to credible, reliable, and easy to understand information to help them get in control of the life they REALLY want to live.<

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    Disclaimer: The information in this article is general in nature as it has been prepared without taking account of your specific objectives, financial situation or needs. Therefore, you should consider whether the information is appropriate to your circumstance before acting on it, and where appropriate, seek professional advice from a finance professional such as an adviser.