![Person signing a loan application. Person signing a loan application.](https://cdn.moneykey.com/images/articles/signing2.webp)
If you’ve ever been in a position where you felt like you needed a personal loan, applied for one, and then were rejected, you may have been left sitting there, trying to figure out what went wrong. Having said that, it’s important to remember that if your application for a personal loan is declined, this decision wasn’t made with any personal intent. Every financial institution has set clear parameters to dictate who they’ll lend to and who they won’t. If you don’t meet their criteria, there’s a chance that your personal loan application will be rejected. So, with this is mind, let’s explore some of the reasons why personal loan applications may get rejected and then look at some of the steps you can follow if this happens to you if you need money fast.
Why was my Personal Loan Declined?
When you submit a personal loan application, a financial institution is going to go through a series of steps to determine what type of borrower you’re likely to be, and whether they think you’ll have the means to repay your loan. If you’ve never applied for a loan or you don’t know much about the process, here are some of the common reasons why some people get declined for a personal loan.1. Your Credit Score is Too Low
Your credit score is often one of the most important factors when it comes to personal loan approval. Its job is to summarize your history as a borrower to give loan lenders a sense of your creditworthiness. In a lot of cases, a financial institution will have a specific minimum threshold that they’ll be looking for when it comes to your credit score, and if you don’t meet it, you might be declined for a personal loan. Before applying for a loan, it’s a good idea to check your credit score by buying it from a major credit bureau or using a free service online.2. You Have Too Much Debt Relative to your Income
If you have a large amount of debt that you still need to pay off, a financial institution will factor this in when considering your personal loan application. For example, if you have $3,000 of outstanding debt on a line of credit and you still need to make five more payments on an installment loan, a lender evaluating your latest loan application may not think you have the financial means to add more debt onto your plate. For this reason, you may get declined for a personal loan.3. You Don’t Bring in Enough Income
This might seem obvious, but a financial institution is going to want to check your income to make sure you’re bringing in enough money on a regular basis to pay off the personal loan you’ve applied for. If your paycheck is too small, you might be declined depending on the size of the loan you’re applying for.![Piggy bank in front of white background.](https://cdn.moneykey.com/images/articles/pig.webp)
4. You Didn’t Meet Various Other Requirements
On top of some of the financial requirements for approval, a financial institution is likely going to have certain other things that they look for. For example, some lenders may only operate in certain states, so if you submit a personal loan application and don’t live in the state that they service, you’ll almost certainly get rejected. They’ll also likely have a minimum threshold for your age. On top of this, you’ll want to make sure you fill out a personal loan application in its entirety. So, if you leave out important information like your income, your assets, or certain personal identification information, this could be a problem.What Should I do if I’m Rejected for a Personal Loan?
If you apply for a loan and your application is rejected, there are a few steps you’re going to want to take to improve your chances in the future. Here are three important things to do moving forward.1. Understand Why you Were Rejected
The first and most obvious thing for you to do if your application for a personal loan is rejected would be to determine why this happened in the first place. Start by reaching out to the financial institution to see if they can shed some light on the reasons for the rejection. If they aren’t able to give you any insights, consider some of the rejection reasons we went over earlier and use that information to try to figure out why you were rejected on your own.2. Address your Issues
Once you’ve been able to identify the problem, you can start to try to fix it. Now, this can be a lot easier said than done. If it’s a simple matter of making sure you fill out the personal loan application in its entirety, you can likely resubmit it fairly quickly, making sure to be thorough this time. If your issues stem from something else, the way you go about regulating your issue is going to have to be somewhat specific to your situation. Some general things you might consider are to start by lowering the asking amount. If the lender feels like your income is too low or that you’re carrying too much debt, try requesting a lower amount, assuming that the lower amount still satisfies your needs.![Personal applying for a personal loan over the phone.](https://cdn.moneykey.com/images/articles/red-hair.webp)
- Paying off as much of your debt as possible (ideally all of it)
- Increasing your overall income
- Making sure you pay all your bills on time
- Using less credit
3. Submit Another Application or Reassess your Potential Options
If you feel like you’ve addressed your problems and improved your financial standing, it might be time to submit a new personal loan application. Keep in mind that there may be an impact on your credit in doing so. You might also want to consider looking into other potential options.![Personal looking at loan applications.](https://cdn.moneykey.com/images/articles/contracts.webp)