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Why Was My Loan Application Declined?


You may look to borrow money online if you have found yourself in a tricky financial situation. If you have incurred an unexpected cost such as medical bill or car repairs that you cannot afford but need to get paid quickly, particularly in advance of your next payday, then you may have looked to get cash fast in the form of a loan.

The most popular form of short term loan is a payday loan, which allows you to ease the financial burden until you have the money to pay back your loan at the next payday.

However, sometimes, even when you may just need to borrow $100, your loan application might be declined or rejected by your lender. There are many reasons this might happen including you not actually being eligible for the loan that you have applied for.

This guide takes you through why your loan application may have been denied and how you can improve your chances of getting a loan next time.

Why Was My Loan Application Denied?

There are a few reasons why your loan application might have been denied, although this is not a complete list, these are the most common reasons that loan applications are denied especially when you are looking to borrow money online. You should remember that you should only apply for loans that you are sure you will be able to repay. Never look to apply for a loan, online or otherwise that you may not be able to repay, as there are serious repercussions for failing to make scheduled repayments.

Is Your Credit Score Too Low?

It is likely when you apply for a loan, be it a $500 loan or something larger like a $2000 loan, your lender will have performed a credit check and had a look at your credit score. Your credit score tells the lender about your financial history and whether you have any outstanding debts. Although not all lenders will carry out a ‘hard’ credit search (one that leaves a record of the search on your credit file) they will nonetheless need to check your credit record in one way or another to establish if you are a good loan prospect or not.

Lenders might also have stricter requirements if you are applying for a short term unsecured loan. Although bad credit loans are certainly available in the US, if your credit rating is particularly poor.

Your loan may have been rejected because your credit score was too low for the lender and they could not trust that you would be able to pay back the loan on time or even at all. Because a credit score is an indication of your credit worthiness, the lower the score, as a result of things like failure to make repayments and applying for numerous loans at once, if you have a lower than average credit score, you will struggle to find a lender that will accept you.

There are easy ways to increase your credit score including signing up for the electoral register in the USA.

Are You Eligible For The Loan You Are Applying For?

Simply put, you may not have been eligible for the loan that you applied for. Different lenders and different states in the US have different laws and regulations when it comes to loans and borrowing money.

It is vital that you check before you apply for your loan that you are eligible to receive a loan in your current financial and physical state. Some normal requirements include a US checking account and a stable income.

If you are not eligible for the loan in the first place, you will be denied the loan almost immediately.

Having your loan application declined can be stressful, but there are many reasons for why this may have happened

Is Your Loan Applications Missing Key Information?

Another reason that your loan application might have been denied is because you are missing key information from your application form. Lenders will need you to provide key documents and information about your living expenses, employment and various other affordability criteria to help them check that you are eligible for the loan and are likely to be able to repay on time.

If you do not provide the correct or the information at all then the lender is likely to deny your loan application. Make sure you have everything that you might need to apply for a loan before you apply to receive money from a lender.

Have You Tried to Borrow Too Much Money?

Your loan application might have been denied because you tried to borrow too much money. As mentioned previously, the lender will do a background check to make sure that you are eligible for the loan. If the lender believes that you will not be able to pay back as much as you are looking to borrow then they will more than likely reject your loan application for this reason.

Therefore, if you find yourself for example needing to borrow $600 and you are sure you can repay the loan amount as required by the lender, don’t try and apply for more, just to have a little extra cash in your pocket or “just in case.” You may not actually be eligible for a larger amount and will be rejected by lenders on that basis.

Is Your Income Insufficient or Unstable?

If you cannot prove that you have a stable and regular monthly income then it is unlikely that you will be accepted for a loan by most lenders. This is because the lender cannot prove that you will have the money to pay back the loan at the agreed upon date. By being in a form of employment, lenders will be able to see that you have money coming in that you can use to make your repayments.

Therefore if you have a very small salary or one that fluctuates month to month then it is possible that your loan application was denied for this reason.

How Can I Improve My Chances Of Getting A Loan?

Here are a few simple ways that you can improve your chances of getting a loan:

  • Boost Your Credit Score  – Boosting your credit score is a great way to improve your chances of getting a loan, whether that is by repaying old debts on time for a consistent period of time or simply by cutting down on your spending
  • Understand Your Means  – Make sure that the next time you apply you do not apply for a loan that is clearly more than you will be able to afford or not enough time for you to be able to pay back
  • Pay Down Previous Debt Or Improve Income  – Try to pay down old debt to show lenders that you can pay back previous debts or instead look to improve and increase your income to show lenders you will have the money to pay back your loan
  • Only Apply For Loans you Absolutely Need, Never More – Don’t try and apply for more money than you reasonably believe you actually need. Stick to what you need for a financial emergency and no more, so you will be more likely to be able to pay back the loan and improve your credit score by doing so