Miranda Marquit has 10+ years of experience covering financial markets for various publications. She is the Co-host of Money Tree Investing.
Updated September 14, 2024 Fact checked by Fact checked by Vikki VelasquezVikki Velasquez is a researcher and writer who has managed, coordinated, and directed various community and nonprofit organizations. She has conducted in-depth research on social and economic issues and has also revised and edited educational materials for the Greater Richmond area.
If you’ve been denied a personal loan, you might worry that you won’t be able to get the funding you need. However, it’s possible to reapply for a personal loan, even if you’ve previously been denied.
Before you move forward, however, it’s important to understand why your loan application was denied in the first place—so you can take steps to address those issues. Once any loose ends are tied up, you’ll more likely have your loan application approved the next time around.
Understanding why your personal loan was denied is the first step toward figuring out what steps you need to take to secure your funding the next time you apply. Every lender is different, and each one has its own criteria.
The good news is that if you’re denied, the lender must provide you with an adverse action notice explaining the information used to make the decision. Below are some of the common reasons why your loan application might be denied.
Depending on the lender, there might be specific criteria that you need to meet to qualify for a loan. Some common basic requirements include:
Some lenders might also require that you have no recent bankruptcies to meet basic borrowing requirements.
One of the main factors that many lenders use when deciding whether to approve a personal loan is the prospective borrower’s credit score. While there are lenders that will approve you without a credit check or if you have bad credit, many lenders expect you to have a credit score of at least 640. If your credit score doesn’t meet the minimum criteria, then you could be denied.
Not every lender has a minimum income requirement. However, even if there isn’t a minimum income criterion, how much money you make might still matter. A lender might want to know that your income is high enough to make minimum payments and eventually pay off the amount you borrowed (plus interest). A lender might worry that you will eventually default if your income is too low.
The amount of debt you have relative to your monthly income could also result in a personal loan denial. You might have a high income, but if a large percentage of that income is going to service other debts, then a new lender might worry about extending you another personal loan. Depending on the lender, it might be hard to get the best interest rates once your debt-to-income (DTI) ratio reaches 36%. After your DTI reaches 43%, you might experience more personal loan denials.
Every lender has its own application requirements, and you could be rejected if you’re missing a piece of the puzzle. If you’re supposed to upload bank statements but don’t, that could lead to a denial. Incorrect information on your application might also result in your request being denied. Before submitting your application, review all the fields and ensure that you provide the required documentation.
Finally, there might be other reasons why your personal loan application was denied. Perhaps you haven’t been living at your current address for very long, or perhaps you change your cell phone number frequently. Both of these situations might signal that you’re not stable and could be a risk to lenders.
Some lenders might ask to connect to your bank so they can gauge your cash flow. If your account is regularly overdrawn, that might also make some lenders feel nervous about approving your loan application.
If you’ve been denied for a personal loan, you might be able to reapply. Check with the lender to see whether you need to wait a set amount of time, such as 30, 60, or 90 days. Before you reapply, however, consider the following tips to increase your chances of being approved:
If you want to improve your chances of qualifying for a personal loan, there are a few things you can do to make yourself more appealing to a potential lender:
A co-signer or co-borrower might also be able to help you increase your chances of approval. If you can find someone willing to share responsibility for the debt, you might be able to qualify, even if you wouldn’t have been able to by yourself.
You can also look for alternatives to taking out a personal loan. Some ways to avoid the need for personal loans might include:
Every lender has its own criteria and credit requirements. However, some of the easiest loans to get approved for are credit cards (especially secured cards) and high-interest loans, like payday loans.
Each lender has its own minimum credit score requirement, but some lenders like to see a credit score of at least 640 to get approved for a personal loan. However, you might need a credit score of 670 or higher if you want the best interest rates.
How long to wait to reapply depends on the situation. On one hand, some lenders will let you reapply quickly if you do so with a co-signer. On the other hand, if you were denied due to a credit score issue or an error on your credit report, you might want to wait four to six months to give yourself time to resolve the issue.
If you’re denied for a personal loan, you can reapply—and potentially be approved. However, before you reapply, make sure you’ve learned why your application was rejected in the first place so that you can improve your situation and increase your chances of approval.