Loan Rejection: Why Your Loan Was Declined

Personal Loans

Loan rejection is disappointing and discouraging. To many people, it feels like a personal insult. Apart from a fact that rejection simply feels awful, people rarely apply for a loan on a whim, they take a loan because they need it. If taking a loan is the only way you can think of to obtain funds to finance your new business, make an important purchase, or pay for car repairs – a loan refusal is a bad news.

It is even worse if you deal with some calamity, such as a need for urgent medical treatment or emergency leaking roof repair. If you count on that loan, a rejection may come as a shock and create more havoc.

If your loan application has been rejected, it means that the lender decided that you will not be able to keep up with the repayments. Loan refusals may also lower your credit score when your application is declined, so find out why and try to make any changes you can to improve your chances of being accepted in the future.

Who Qualifies for a Loan?

First things first.

Remember that you should not apply if you do not meet the eligibility criteria. Find a trustworthy lender and start from checking if you are eligible for a loan. They usually have a list of requirements that must be met – you can find it on their website. It may look like this:

  • Are you 18 years or older?
  • Are you an Australian citizen or resident?
  • Do you have an ID such as an Australian passport or drivers’ license?
  • Are you employed (you’ll need proof of employment and income)?
  • Have you worked for the same employer for at least three months?
  • Some of those requirements are essential, but you will see that some lenders are stricter than others. Always make sure that you meet these requirements first before you even apply for a loan. For example, there is no point in applying if you just got a job and you are still on probation. Most lenders will ask for proof of a stable and reliable source of income.

    Make sure that all the information you provide is correct. You may feel tempted to stretch the truth to get what you want, but it is never a good idea. Using false information to get the loan approved is fraudulent – and can have serious consequences.

    Why do Lenders Reject Loan?

    According to ASIC’s MONEY SMART guide, there are several reasons why your loan may have been rejected.

  • You have defaults on your credit report (overdue payments which are more than $150 and of 60 days or more)
  • You have missed repayments to a credit provider such as a bank that is more than 14 days past the due date
  • Information based on your income and your existing expenses and debts suggests that you may struggle to make the loan repayments on time
  • You do not have enough savings in your bank account to ensure that you will be able to make the repayments
  • Lenders may use their own specific eligibility criteria, for example:

  • You have applied for multiple loans in the last couple of months
  • Your income is insufficient to cover your living expenses and the loan repayments
  • You look like a job-hopper, and they might wonder about the reasons for you changing the jobs
  • How to Avoid Having Your Loan Rejected?

    If you are not sure about those criteria, you can call the lender and ask them for clarification. If you meet all the criteria and your application still gets rejected, you will know most likely there was something in your credit report. That is why it is important to check your credit score unless you know that it is perfect.

    Taking all the necessary steps before you apply for a loan is the surest way of avoiding loan rejection. Unfortunately, it may still happen, even if you hope you have done everything you could to get it approved.

    Being declined by one lender does not mean that your loan application cannot be approved by other lenders. You can always try another lender as they have different eligibility criteria. Just remember that multiple applications, especially over a short period of time, can negatively affect your credit score.

    So instead of trying again and hoping that you will get lucky this time, call the credit provider that rejected your loan application and politely ask why your application was rejected. Make a note of all the reasons, and then address them one by one.

    The most common reason for rejection is your financial situation. In many cases, it can often be corrected quite easily. Many people have a good job and a good income yet never have enough money because they have bad financial habits.

    All they need to do to improve their situation is:

  • Create a budget and stick to it
  • Track your spending
  • Shop around for the best price
  • Set up a separate savings account and deposit money into it regularly
  • Stop using credit cards to buy things you do not need and cannot afford
  • Avoid impulse buying altogether
  • Remember that lenders will check your bank account statement and will see if you are overspending. They will also notice any new regular payments, for example, payments by installments, monthly memberships, subscriptions and so on.

    Tracking your spending is especially beneficial. It will help you see your “spending leaks”, all these small purchases that add up over time. If you realize that you spend almost $100 every week just on coffee and café lunches that you buy at work every day, you may decide to make your own.

    You feel that you are in dire straits and there is nothing you can do. After all, not everyone has a good job and a good salary, and it not always just a case of managing the money have. You may find that even in a situation that you feel is helpless, you can do something to improve it. You can contact a financial counselor who offers free assistance and check what options you have.They will help you get back on your feet and build a positive credit score so when you apply for that loan in the future, you will have a better chance of getting it approved.

    Getting your rejected can be upsetting but there is no need to take those rejections personally. One of the reasons credit providers must comply with responsible lending obligations is because it protects people who are not able to protect themselves, for example, gamblers. The lenders must not lend money to a person who will struggle to repay it because it will only worsen their situation.

    Understanding the loan application process, eligibility criteria and the reasons why loans are rejected will help become better at what you can control – for example, create a passive source of income to make more money and pay your bills and credit obligations on time. That will improve your chances of getting through the next loan application process quickly and successfully.


    Searching for a breezy, personal loan?

    Look no further than Breezy Loans for quick finance topped with top-notch customer service and loan specialists who get it.

    Breezy Loans Pty Ltd ABN: 29 627 702 943, Credit Representative Number 514197 is licensed and provide credit services under Australian Credit License 389610. If we could not provide you credit, we will help to match your credit enquiry with another lender partner from our panel of lenders who we think may help you. Our panel of lender partners are licensed and follow responsible lending practice. We may receive referral fee (amount not ascertainable) if you decide to go with them once approved. However, they may ask you further information to assess your loan application where you can deal directly with that lender.The information on this website is general in nature and does not take into account your objectives, financial situation or needs & does not constitute any financial advice. We strongly recommend you take independent advice before choosing any loan product.

    Disclaimer: "Same Day Approval" as advertised - means, the applicant will get the application outcome on the same working day. If you are applying after working hours, you will get the reply next working day. Public holidays might affect the process of the outcome.

    Disclaimer: "No Credit Check Loans" as advertised - means, most of the decisions are based on the present income of the applicant. There could be several reasons behind bad credit in past. A strong employment history and zero dishonour in last 90 days are required to be eligible for a no credit check loan. The lender can also perform a credit check as it is a part of application processing.


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