5 reasons your personal loan application was declined

a couple analyzing their personal loan application paperwork


Been declined for a personal loan? It isn’t a nice feeling especially when you really need the cash, but unfortunately it can happen.To help get back in control of the situation, understanding why your application was denied can help you out the next time you try to qualify for a loan.

Here are the 5 most common reasons why people are not approved for a personal loan.

1. Incorrect information on your credit report
Credit reporting errors are a common occurrence and can impact your credit score and in turn your ability to get a loan. Some of the errors can include out-of-date personal information or having the same debt listed more than once creating a duplicate. Incorrect record of the amount of credit enquiries listed on your file as well as adverse notices can also have an impact on your overall credit rating. If you’ve been declined a loan because of the information in your credit report, your lender would have sent you an adverse notice letting you know the reasons the application was unsuccessful. The accuracy of this information in your credit file is important so it’s a good idea to obtain a copy of your credit report and have it amended right away if you think the data is incorrect.

The following are some of the credit reporting agencies available in Australia:

2. Capacity to service the loan
Under the National Consumer Credit Protection Act 2009, lending responsibly means conducting a suitability assessment that the loan we provide you meets your requirements and objectives. This includes the lender having a well-informed view of your financial situation and your ability to meet loan repayments based on the loan amount, income, liabilities and expenses you may have. If the assessment shows that the amount you have requested will potentially leave you struggling, your application will be declined.

3. Large amount of debt
Although a personal loan can be a way to consolidate your existing debts, your loan application might not be successful if the total amount of debt you have owing is too large. Lenders will look at the percentage of your income that goes towards paying your existing debt (known as your debt-to-income ratio) when assessing your loan application, so paying off the balance before you apply for a new loan could help set you up for success.

4. Instability in employment and irregular income
For most people, the main source of income will be from employment. In light of this, to be able to pay for the loan repayments every month, it is important for lenders to see that you are in a stable financial position. If you’ve been changing your job every few months and unable to prove that you have a regular income, your loan application may bedeclined.

5. Poor credit history
This could mean two things either, you do not have a sufficient credit history which means lenders are unable to access your financial conduct. Alternatively, your credit report is showing existing issues such as a poor repayment history on your current debts or overdue payments of 60 days or more where debt collection activity has been started. A poor track record can be one of the reasons application lender may reject your loan application.

It is also important to note that when you apply for a personal loan, the application is counted as an enquiry on your credit report.

There is no sure-way to guarantee that your personal loan application will be successful but having a good understanding of why your application is declined will help you make an action plan. Remember that your credit report has a detailed record of your borrowing history, so it is important to be aware of what’s on file and always review the accuracy of your credit report regularly. 

Here are some handy tips to you get back on track and get organised before applying your next personal loan. You can use this handy calculator to get an indicative offer and find out how much your monthly repayments might be for a personal loan with Pepper Money. That way you can plan them into your budget and make sure they can work for you.

Then, when you’re ready, apply online and receive a decision within 15 minutes. If you’re having and trouble applying online give us a call on 1300 659 430 or get in touch with an accredited Pepper Money broker. We’re here to help.

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