What can cause your personal loan to be rejected

Published on November 24th, 2020
  Written by 
Bill Tsouvalas
Bill Tsouvalas is the managing director and a key company spokesperson at Savvy. As a personal finance expert, he often shares his insights on a range of topics, being featured on leading news outlets including News Corp publications such as the Daily Telegraph and Herald Sun, Fairfax Media publications such as the Australian Financial Review, the Seven Network and more. Bill has over 15 years of experience working in the finance industry and founded Savvy in 2010 with a vision to provide affordable and accessible finance options to all Australians. He has built Savvy from a small asset finance brokerage into a financial comparison website which now attracts close to 2 million Aussies per year and was included in the BRW’s Fast 100 in 2015 as one of the fastest-growing companies in the country. He’s passionate about helping Australians make financially savvy decisions and reviews content across the brand to ensure its accuracy. You can follow Bill on LinkedIn.
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You searched for a personal loan that is affordable for you. You applied and anticipated a thumbs up, but before you know it you are greeted with an “unfortunately your loan application has been rejected” which can dampen anyone’s mood. But if you are left scratching your head as to why your application was rejected here are a few reasons.

1. Your credit file

When applying for a loan the first place most lenders will look at to help them decide whether they should approve your loan or not is your credit report and credit score. This basically shows them all the loans and debts that you have taken out, and whether you have managed to meet payments on time or missed payments. They will also be able to see if you have been declared bankrupt before or whether you are on the tipping point of falling into a debt cycle which could affect your ability to pay back the loan. Checking your credit report will help see what needs to be fixed before heading to a lender.

2. Your employment record

When applying for a personal loan it is important to check the eligibility criteria to avoid having your application rejected. During the application process, most lenders will require that you submit documents that show proof of income. Some might require 3 months’ worth while others could request at least 2 years’ worth of statements if you are self-employed. This is to safeguard lenders from giving you a loan that you are unable to pay back due to your financial situation, and it is also there to protect you from getting into debt.

3. Not falling into the age limit

Most personal loans require that the applicant is of the legal age of 18 years before applying for a loan. This means that even if you have a couple of weeks to go before you turn 18, you will have to wait until then. Co-signers also have to be 18 years old and above to apply for a personal loan.

4. Applying too many times

You might have seen a fair share of rejections when it comes to applying for a personal loan. The immediate response might be to try elsewhere, but this could affect your credit report and also increase your chances of being rejected. Applying for a personal loan in a short space of time can give lenders the impression that you are not credible enough to lend a loan to. To avoid jumping from one lender to the next you could consider asking a lender why your application has been rejected and proceed to correct these problem areas to improve your chances.

5. Career instability

Borrowing a loan is all about proving that you will be able to meet your loan repayments without defaulting on it. If your career has been on the rocks and you haven’t been able to hold a job for more than a year or two a lender is likely to reject your application. This also applies to freelancers.

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This guide provides general information and does not consider your individual needs, finances or objectives. We do not make any recommendation or suggestion about which product is best for you based on your specific situation and we do not compare all companies in the market, or all products offered by all companies. It’s always important to consider whether professional financial, legal or taxation advice is appropriate for you before choosing or purchasing a financial product.

The content on our website is produced by experts in the field of finance and reviewed as part of our editorial guidelines. We endeavour to keep all information across our site updated with accurate information.

Approval for personal loans is always subject to our lender’s terms, conditions and qualification criteria. Lenders will undertake a credit check in line with responsible lending obligations to help determine whether you’re in a position to take on the loan you’re applying for.

The interest rate, comparison rate, fees and monthly repayments will depend on factors specific to your profile, such as your financial situation, as well as others, such as the loan’s size and your chosen repayment term. Costs such as broker fees, redraw fees or early repayment fees, and cost savings such as fee waivers, aren’t included in the comparison rate but may influence the cost of the loan. Different terms, fees or other loan amounts may result in a different comparison rate.

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