Reasons Why People Get Rejected for Personal Loans

Reasons Why People Get Rejected for Personal Loans
Reasons Why People Get Rejected for Personal Loans

At some point in your life, things may happen, forcing you to apply for a personal loan. It may be an emergency that you don’t have enough money to take care of. Or an investment opportunity that you need to jump on immediately, thus you saving up for it is not an option.

There are various types of lender you can approach for such a loan from. You may opt for banks, lending companies, payday loan agencies or even online lenders.

All these lenders, however, receive thousands of applications for different types of loans. Since they have limited resources, only some of the applicants get the loan they requested while other applications are rejected.

Here are some of the reasons your loan request may find its way into the rejected list.

Your credit history isn’t good enough

This is possibly the single most common reason for loan applications to be rejected. Whenever a financial agency lends money, there is always a risk that the borrower will default on payment. The application process is designed to reduce this risk to a minimum.

That is why lenders always check your credit history to know your commitment and timeliness in repaying your loans. If you have a bad repayment history, you are marked as a risky borrower and your application will be rejected.

To avoid the frustration of having your application rejected, work on improving your credit score by repaying your loans within the stipulated timeline. This includes your credit card

Multiple debts

Despite your good credit history, your application for a personal loan may be rejected if you are currently servicing many outstanding debts. Having several debts at the same time suggests that you are do not have financial discipline and borrow even when not necessary.

Therefore, although you may be servicing your current loans religiously, the lender will see you as some that could be overwhelmed at any time and start defaulting. The high debt to income ratio also indicates that if you lose your income the chances of continuing to repay your loan are low.

Avoid being in such a situation, repay one loan fully before taking another one. Also, if you have several loans you can consolidate them into one bigger loan that is easier to pay back.

Being registered in the credit bureau as a defaulter

If you have ever defaulted on a guaranteed loan, there might be some chance that your details were presented to the relevant credit bureau as a defaulter. If you are registered as a defaulter, you may not be eligible for loans for quite a while even if you finish repaying the loan after being reported.

You will need to follow up and have your name cleared. Until then, your applications for loans will continue to be rejected.

Low income

Lenders need you to demonstrate that you can pay the loan you are asking to borrow. The only way for them to determine this is by analyzing your current net income. If the amount you are requesting is a small percentage of your income, your loan request may be approved.

However, if the net pay is too low in comparison to the loan you want, your application may be rejected. You should therefore strive to keep increasing your income. You can include your income from any steady business or part time job to boost your chances.

You have been hopping from one job to another

Since your income is the indicator that you will repay your loan, the lenders want to have some assurance you will not lose the income any time soon. As such, many lenders require you have worked in your current job for at least three months.

If your job history indicates that you have been shifting your job frequently, it may also be an indication that you are not disciplined. The lender may therefore reject your application fearing that you may not commit on the loan like you quit jobs.

Errors in your application

Other than stating the amount you want to borrow, your application is your introduction to the lender. You will be judged based on the information you present in it. As such, if the lender identifies some errors in it, you may appear a bit untrustworthy.

It might also indicate a lack of keenness on your finances. Since they have thousands of applications to process, you can almost be sure that the lending agent will not follow you up to correct the mistake. Instead, your application will be rejected.

Past rejection

Financial experts will always advice you not to send multiple loan applications. The reason for they tell you this is because if some of the loan applications are rejected, it reflects on your record. The rejection report raises a red flag to other lenders you might approach for a loan in future.

Multiple rejections indicate your desperation and recklessness thus a default risk. To avoid this, only apply for loans you have a high chance of getting approved. If you fail, take your time to correct your previous errors before applying again.


Having your loan application rejected can be quite frustrating. In addition, if you were in a critical emergency, the situation may get worse as you look for alternatives. Avoid such unpleasant experiences, keep your credit history and records in place.

Also, understand the illegibility requirements for the loan package you want to apply for and check them against your details. If you do not qualify, do not apply.