07 Jul

Why was my loan application denied?

loan application

When your loan application is denied, it can be very discouraging. However, be aware that this is a very common situation. Many external factors can influence your ability to obtain a loan, for example, the current nature of the economy or simply the lender you were dealing with.

If you want to increase your chances of getting a loan, we strongly suggest you look at your current financial situation.

These are some possible reasons why your application was rejected and you will also find some suggestions to increase your chances.

Rate of entitlement


The majority of lenders will refuse your request if your debt ratio is significantly high; in their eyes, you are a risky client. Your debt ratio is the amount of gross income you use to pay your monthly debts. If too much of your income is spent on debt repayment, then most lenders will not accept your loan application because they will contribute more to your debt.

A very poor or even absent credit history

credit history

The credit history is the main tool that allows you to have other credit. If you have never had credit or if your credit history leaves something to be desired, expect to receive a denial of your loan application. Any lender you will see will necessarily check your credit history, to analyze your ability to manage money responsibly. Also, lenders will check if, in the past, you have not had bankruptcy or outdated credit limits. Managing your credit history should be a priority, as failing to do so may prevent you from making any progress in life, including not being able to buy a home.

Innumerable credit card queries

Innumerable credit card queries

A credit card inquiry is automatically done when you apply for a new line of credit. In short, the lender is simply checking your credit history.

Unfortunately, a past that contains too many questions could have a detrimental effect when applying for a new line of credit. The large number of queries sends the lender a very simple message: Time and time again, you tried to get a new line of credit, but you failed. Therefore, in the eyes of the lender, you seem like an unwanted customer, since the other lenders have also refused you.

State of employment

Often, it is when a person is unemployed or part-time, that they most need a loan. However, lenders do not think the same way. In the majority of cases, lenders want to make sure that they will be reimbursed for the loan they offer you. One of the guarantees to convince them is the job you hold. Not having a job or having a job whose pay is not constant or significant will prevent you from getting the loan you want.

Too much debt

Too much debt

It is unlikely that a lender will accept your application if you are already struggling to repay your debts and, in addition, if your payments are late. Having too much debt is a drag on your financial development, but know that once you get back on track and start repaying the debt, getting a new loan will be easier. If ever your application is denied, see this as a motivation, as an incentive to work hard for freedom and financial security.

Member of a financial recovery program

If you are on the verge of bankruptcy or are enrolled in a financial management assistance program, then you deserve to be congratulated. Although you are on the right path to a better financial situation, you will still not be approved for a new loan. In fact, when a person is part of a financial management assistance program, he shows his creditor his inability to manage a loan responsibly. However, once the program has ended, you are encouraged to reapply to apply for a new loan.

Collection of debt

Collection of debt

In order for there to be debt collection, you must have a credit account (credit card, loan, etc.) and you must exceed the payment deadline significantly. If this happens, the creditor will have already sent the collection agents to try to recover his money. The debt collection is the worst thing when a wants to apply for a new loan. Therefore, no wonder the application is denied.

Regardless of the creditor’s response to your loan application, know that you can always improve your financial situation. For that, you have to understand the reasons why the loan was refused to you. Thus, you will be able to avoid the same mistakes in the future.