June 18, 2019 6:49 am Written by

Why Was My Loan Application Rejected?

Why Was My Loan Application Rejected?

No one likes to hear or see the word rejected, denied, not approved, or just simply no; especially on or for a loan application.

When you apply for a loan, there is a reason, you need the loan for (insert reason here), and being denied or rejected for that loan changes your entire plan. It may change your life if you are applying for a car loan and need a car to get to and from work.

So a negative response is not what we need, and in some instances you may not even know why your loan application as rejected.

One thing you always need to keep in mind is that lenders want to grant/make loans. That is the business they are in. If they do not make loans, they will not be in business.

So rejecting a loan application is the last thing they want to do, however, in some instances they cannot grant a loan for various reasons.

So what are those reasons that a lender may not approve a loan application?


One of the main factors lenders look at in granting a loan is affordability, they want the loan to be repaid.

If you apply for a loan amount that is too high, or outside your ability to repay the loan, the loan may be rejected, and in some instances the lender may approve the loan, but for a reduced more affordable amount.

When applying for a loan, most lenders will ask you to complete an income and expenditure form, outlining all your income and expenses.

Prior to applying for a loan, is is a wise thing to prepare an I&E form for yourself, so you know and can show affordability for the loan you request.


Credit history and credit scores are also important when applying for a loan, and a low credit score could be a reason why a loan is rejected.

As we will see with other reasons why a loan may be denied, it is good to get a copy of your credit history prior to applying for a loan. You can review it for any errors and omissions and have these corrected prior to applying.

Errors on Your Credit File

As we just mentioned, getting a copy of your credit history prior to applying for a loan is a wise move. There may be errors on your credit history that reduce your credit score. This also ties in with Fraud: If someone has used your identity in the past and taken out loans or has some how tarnished your credit, you may not find out unless you review your credit file.

Too Much Debt

Being overextended and having high balances on your credit cards and other accounts not only lowers your credit score, but could also be a reason why a loan application may be rejected.

It also ties in with affordability. If you are overextended with your accounts, you may be struggling to make those payments, which means there is an affordability issue with any new loans.


Just as we mentioned getting a copy of your credit history prior to applying for a loan to see if it is in order, there may be some documents a lender may request in order to approve a loan.

You may be asked to provide wage statements, bank statements, and other documentation in order to verify your income and expenses.

If you are self-employed you may need to show the past few years tax returns or have an accountant’s statement.

If you cannot prove what you have stated on the loan application, a lender could reject the loan.

What To Do Before Reapplying

Prior to applying for a loan it is always god to get a copy of your credit history and review it and also know your credit score.

Having done an income and expense sheet prior to applying is good as well, that way you have thse details at hand when a lender requests them.

In addition to having any and all documents a lender may request.

Being prepared will not only make the loan process go quickly and smooth, but also increase your chances of being approved.

Looking for a loan but don’t have a good credit rating? Follow this link to compare guarantor loans with bad credit.

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