What To Do if Your Loan Application Is Declined

Having your loan application declined can be scary — especially when you need the funds fast. Luckily, there are steps you can take to improve your chances of being approved.

If you were denied financing, you’re not alone. Thirty-three percent of Americans were denied personal credit in 2021.1 Here’s what to do if your loan application is declined.

Determine Why You Were Denied

When you’re denied a loan, the first thing you’ll want to figure out is why. You may find it was a simple paperwork mistake, or it could help you figure out what areas you need to work on. Here are some of the common reasons loans are denied.

  • Your Credit Score Was Too Low.  Most lenders have a required minimum credit score. If you don’t meet the requirement, your application will likely be declined. Your credit score is important because it gives the lender a quick measure of your credit and repayment history.
  • You’ve Borrowed Too Much. If you already have a loan, line of credit or your credit card is almost at its limit, lenders may deny your loan application. This is different from taking out a loan to consolidate debt — which may help you manage your monthly bills. Taking on an additional loan on top of other debt can be risky and may lead to some financial trouble.
  • You Don’t Have a Steady Source of Income. Lenders will want to verify that you have a source of income that will allow you to repay the loan. You’ll need documentation of your income (pay stubs or bank statements) to prove that you have the capacity to take on debt.
  • You Don’t Meet the Minimum Requirements. For most lenders, you need to meet some basic requirements to take out a loan. This could include things like your age or citizenship status. Always research lenders to see if you’re able to borrow from them.
  • You Had Information Missing on Your Application. Sometimes, it’s as simple as missing information on your application. Double-check to see if there is anything that didn’t get recorded correctly or was left off.

How You Can Boost Your Chances

  • Find a Lender That Fits. Traditional lenders, like banks, may have strict credit history and personal requirements. Online lenders often have more forgiving standards. You may qualify for an online loan or line of credit, even if you were denied at the bank.
  • Only Apply for What You Need. Think through how the money will be used and create a plan. You may not need as much as you originally thought, and having a plan will help you put the funds to the best use. You may get approved if you apply for a lower amount.
  • Improve Your Financial Health. Financial health is important but can feel like an uphill battle when you’re trying to get back on track. When things get tough, focus on the goals you’re working towards. If you’re a NetCredit customer — check out some of our online resources.

Build Your Financial Health

  • Free up Some Funds. Go over your last few months of bank statements and see if there’s anywhere you’re able to cut back. You may find that there are some areas where you can reduce your spending and free up some more cash.
    If you’re already feeling stretched thin, you can often find local support. Search for resources like food assistance and help with utilities and household bills through SpringFour. NetCredit offers access for free.
  • Build Your Savings. One of the first rules in personal finance is to pay yourself first. This means taking a portion of your income and putting it into savings before you pay anything else. Even if it’s only five bucks a paycheck, it’ll help you get in the habit of saving.
  • Build a Better Budget. The word budget might create some feelings of anxiety, but it doesn’t have to. Some online tools and apps can help you create and stick with a realistic budget. One of the easiest ways to start is with the 50-30-20 rule. This means you spend about 50% on needs, 30% on wants and 20% on savings.

Consider Other Options

If you’re still unable to secure a loan, there are some things you can do to make some extra cash. Here are a few ways to boost your monthly income.

  • Get a Side Hustle. Consider taking on some extra work. There are many opportunities you can take advantage of. Here are some ideas:
    • Part-time work at a local business
    • Pet-sitting
    • Deliver for a food delivery service
    • Drive for a rideshare company
    • Become an online assistant
  • Get Creative. If your schedule is too tight for a side hustle, you can get creative with some money-making ideas. You could host a garage sale or sell unwanted clothes. If you’re a photographer or artist you can sell your work. Think outside the box and look for opportunities unique to you!

Resources:

1Backman, M. (2022) 33% of Americans Were Denied Credit in the Past Year. Here’s How to Change That.

About 

Baylee Alerding is a copywriter specializing in finance. Before joining Enova in 2022, she worked for a financial planning firm in Northern Virginia, where she regularly contributed articles on financial literacy, personal finance and other monetary trends. She graduated from Virginia Commonwealth University with a bachelor's degree in communications. She’s an avid reader and loves travel and adventure.

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