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I Need A Loan But Keep Getting Declined: What Do I Do?

Miranda Crace6 minute read
UPDATED: July 25, 2023


Personal loans are a great option for individuals in need of temporary financial assistance. Unfortunately, you may not qualify for one on your first or even third application. Being denied a personal loan (especially if it’s happened more than once) can be extremely discouraging and may leave you feeling like you’re out of options.

If you’re currently facing this situation, it’s important to know that you’re not alone and that it’s not entirely uncommon for an applicant to be rejected. Thankfully, when you need a loan but keep getting declined for one, there may still be options available for you to recover and reapply with a greater chance of approval.

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Why Do I Keep Getting Rejected For Loans?

If you need a loan but can’t seem to be approved for one, the first step you’ll need to take is to determine the reason why your loan application was declined. Personal loan applications are declined every day for a variety of reasons. To find out why you were rejected, consider calling the lender to ask them directly or review the adverse action notice provided to you upon or after denial. If they are unable to provide you with a specific reason for denial, you’ll need to do a little more research into your current financial situation.

Let’s take a look at a few of the most common reasons why an individual may be disqualified for a loan.

You Might Not Meet The Basic Requirements

To qualify for a personal loan, there are a few basic requirements that you’ll need to meet. Although some of these requirements may vary from lender to lender, most of these are fairly common. These requirements include:

  • Must be 18 years of age or older
  • Must be a U.S. resident
  • Must be employed on a full-time or part-time basis (including self-employment)
  • Must have a valid checking account
  • Must have no recent bankruptcies filed against you

Your Credit Score May Be Too Low

Though credit score requirements for personal loans may vary depending on the lender, most lenders will want to see a credit score that falls within the range of 600 – 700. If your credit score falls below this threshold, it might be tougher for you to get approved for a personal loan.

Your Income May Not Be Sufficient Enough

One of the most important factors that lenders consider in qualifying borrowers is that they will be able to afford to repay their loan. Lenders will want to review your income to ensure that you make sufficient amounts to afford the monthly payments. If you try to borrow more than you can afford, a lender will likely deny you.

Your Debt-To-Income Ratio May Be Too High

Your debt-to-income (DTI) ratio compares your monthly debt payment obligations to your monthly gross income. Debts such as credit cards or other loans contribute to this number, whereas utility bills and living expenses do not.

With a DTI of around 36%, you will likely begin noticing that your DTI is impacting your ability to secure a personal loan. However, if your DTI reaches 43% or higher, your chances of approval will be greatly impeded.

There Could Be Missing Information Or A Mistake On Your Application

When applying for a personal loan, a common mistake that many potential borrowers make is forgetting to include the necessary documents or making a mistake on their application. When processing your application, false or missing information will be detected by the lender’s system. This can trigger an automatic denial of your loan.

Always be sure to double-check your information when applying for a loan and be sure that all paperwork that the lender has asked for is being provided.

How To Get A Loan When You Keep Getting Denied

Once you’ve determined the likely reason for your rejection, you’ll next want to work on improving your financial situation before applying again. Here are some steps that you can take to increase your chances of being approved.

Improve Your Credit Score

One of the best ways to ensure your qualification for a personal loan is to improve your credit score. The first thing you’ll want to do is check your credit report to ensure that there are no errors present. There are a variety of online resources and websites that you can use to obtain your credit report. If you find any glaring errors in your credit report, you will want to dispute them with the appropriate bureau that issued the report.

Once you’ve checked your report for errors, you’ll want to consider how you can build or improve your credit score. You may want to try one or more of the following methods:

  • Request a credit limit increase. Asking your credit card company for a limit increase and then avoiding using the card, can increase your amount of available credit and lower your credit utilization (a large influence on your score).
  • Pay down your credit card debt. Paying off as much of your credit card debt as you can afford to, can help you lower your credit utilization. Using a debt payoff method or talking with a financial advisor can help you prioritize and overcome credit card debt.
  • Set up automatic payments. Having your payments automatically deducted each month will help you avoid missing or making late payments.

Taking these steps to repair your credit score will also help lower your DTI ratio, which can also increase your odds of approval.

Ask Someone To Co-Sign

If your current financial situation is not sufficient enough for approval, another option may be to ask someone to co-sign with you. Getting a personal loan with a co-signer that has a strong credit score and income is sometimes beneficial in boosting your application. This individual will apply alongside you and you will both be responsible for the repayment of the loan. Because both of your credit scores are on the line if you miss a payment, it’s important to make sure that this individual understands the risks before agreeing to co-sign. Please note that Rocket LoansSM does not currently offer the option to co-sign on loans.

Compare Lenders

Different lenders will have their own set of lending requirements. Because of this, it can be worth comparing various lenders to see if you may be eligible somewhere else.

Using broker or a lending comparison website might increase your chances of finding a lender that will approve you for a loan. With these services, your loan request is sent to several lenders at the same time. This doesn’t damage your credit in any way and can provide you with more options.

If you are still struggling to qualify through a traditional lender, consider working with your local credit union. Credit unions are often more flexible with requirements and willing to work with you to evaluate your financial situation.

Prequalify For A Personal Loan

Prequalifying through a lender could also be a beneficial strategy. Prequalifying typically only requires a soft credit check and can provide you with an upfront answer that includes your loan amount and interest rate. It’s important to note that although a positive response may come from your prequalification letter, this does not guarantee that you will be approved for a loan.

How Long Should I Wait To Apply Again After Being Rejected For A Loan?

If you’ve been declined for a loan multiple times, you should consider waiting to apply again until after you have understood the reason why you were turned away and explored all of your options to improve your financial situation. When you apply for a loan, lenders run a hard credit check on your credit history, which can impact your credit score if you conduct too many within a short period of time. This can also be a red flag for lenders when evaluating your application. If you are rejected because you’ve had too many hard inquiries, you should consider waiting at least 4 – 6 months before applying again.

One exception to this time frame is credit report disputes. With these, you should wait at least 30 – 45 days for the change to be reflected in your updated credit report.

Final Thoughts

Rejection is never easy, but it’s not always the end of the road. When you need a loan but keep getting declined for one, don’t give up. Work with your lender or financial advisor to discuss your options for improving your chances of being approved the next time you apply for a loan.

Want to know if you’re prequalified? Apply online today with Rocket LoansSM  without impacting your credit score.

Apply For A Personal Loan.

Explore your options today and see what's possible in one simple click.

Miranda Crace

Miranda Crace is a Senior Section Editor for the Rocket Companies, bringing a wealth of knowledge about mortgages, personal finance, real estate, and personal loans for over 10 years.