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My Personal Loan Application Got Declined. What Now?

Written by Jessica Steer
Getting rejected for a personal loan can be disheartening, but there are strategies you can use to make sure it doesn’t happen again.
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    Rejection hurts. Especially when you’re turned down for a personal loan you thought you were going to get approved for. You may feel discouraged and even frustrated if you don’t know why it happened or what to do next. Instead of taking the rejection to heart, use this as a learning experience and as an incentive to strengthen your loan application. If you’re unsure where to start, here’s how to bounce back from a personal loan rejection and ensure your next loan application gets the green light.

    Find out why your loan application was rejected

    Before even thinking about reapplying, you need to figure out why you were denied in the first place. Speak to your lender to get to the root of the problem. In most cases, lenders will give you a notice of adverse action that outlines the reasons why you were rejected, what information was used against you (i.e. credit report), and how you can make a dispute if the notice contains inaccurate information.

    The most common reasons for rejected loans are:

    Poor credit or no credit history

    When you apply for a loan, one of the first things lenders look at is your borrowing history and credit score in your credit report. Your application will most likely be declined if they find you’ve made consistent late payments or defaulted on loans in the past. Generally, most traditional lenders like banks will say no if your credit score is below 600 or you have no credit history at all.

    If you don’t know what your credit score is, consider using Borrowell to find out. Partnering with Equifax, Borrowell offers free credit reports so you can easily check for errors and monitor your credit score.

    Insufficient income

    Lenders review all your income sources (work, investments, etc.) because they want to make sure you can afford the minimum monthly payments. Loans will be rejected if they can’t verify your income or believe you don’t make enough. If this is the case, it’s time to reassess your income situation. 

    Make sure to include government benefits and assistance as those sources are considered income. You may also want to add a co-signer or collateral on your next application to increase your chances of getting approved.

    Keep in mind income requirements vary depending on the lender, so it’s worth shopping around to see which are the most flexible. For example, online lenders like Spring Financial only require a monthly income of $1,200 to qualify for an installment loan.

    High debt-to-income ratio

    In addition to income, lenders evaluate your debt-to-income ratio. This ratio is calculated by comparing your income against the debts you owe. According to, a debt-to-income ratio between 43% and 49% is a cause for concern, with 50%+ considered dangerous. Your loan application may be denied if you have a high debt-to-income ratio as lenders fear you won’t be able to handle new debt.

    Short-term strategies to get approved

    If you need money urgently and can't wait until your credit score or DTI ratio has improved, there are a few things you can do.

    1. Offer collateral 

    Some lenders accept collateral to secure your loan application. Examples of collateral include home equity, car titles, and future paycheques. Providing collateral is a quick and easy way to boost the likelihood of loan approval, however, it’s not recommended because it puts valuable assets at unnecessary risk. If something goes wrong and you can’t repay the loan as promised, you could lose your car, or worse, your house.

    2. Find a co-signer

    You’ll need to get a strong co-signer if you don’t meet the lender’s minimum income or credit score requirements. Asking someone to be a co-signer is a big decision, so make sure you choose a trusted friend or family member with a stable income and good credit score. Your co-signer will act as a loan guarantor, which means they agree to repay the loan if you’re unable to. 

    3. Apply somewhere else

    Not all lenders are the same. If you get rejected by one, do your research and apply to others with more relaxed lending policies. Local banks and credit unions are often more accommodating than big banks. Trusted online lenders are another option. For example, Spring Financial works with applicants with sub-600 credit scores.

    Long-term strategies to get approved

    Whether you need money urgently or not, you should still be thinking about your long-term financial health, such as improving your credit score, earning more money, and managing your debt.

    1. Improve your credit score

    Establishing a strong credit history will make borrowing a seamless process in the future. Some of the easiest ways to boost your credit score are:

    • Be responsible with credit cards: Control your spending and keep your credit utilization below 30%.
    • Make payments on time: Remember to pay bills and loans by the due date as 35% of your credit score is based on your payment history.
    • Obtain a credit builder loan: Unlike other loans, you don’t get the money upfront with a credit builder loan. The lender releases the money once you make all the fixed monthly payments. Your payment history is reported to credit bureaus which helps increase your credit score.
    • Use a secured credit card: A secured credit card works like a regular credit card, except you provide a security deposit when you open an account. Since the card is backed by collateral, it’s easier to get approved for and once you start making payments on time, that activity will go towards establishing or rebuilding your credit.

    2. Boost your income

    Increasing your income is easier said than done, but it’s something to think about if your wants and needs cost more than what you’re bringing in. If you want a better job, take some free online courses to strengthen your career skills. You can also start a side hustle. From tutoring and freelance writing to delivering groceries and renting out your extra room, there are so many ways to make extra money outside of your full-time job.

    3. Get your debt under control

    Your current loans may be hindering your ability to get new ones. If you have a high debt-to-income ratio, the best way to lower it is by paying down debt. Use budgeting apps like Mint, YNAB, and Wally to manage spending and track financial goals. 

    Struggling to pay off multiple loans? A debt consolidation loan can help you pay off car loans, credit card balances, lines of credit, and other types of debt simultaneously by combining everything you owe into one loan. This type of loan simplifies the debt repayment schedule and often comes with reduced interest rates.

    Get approved with Spring Financial

    Spring Financial can help you get the money you need, even if other lenders have rejected your personal loan application. There’s no minimum credit score required and the monthly income requirement is just $1,200.

    Spring Financial makes the loan approval process easy no matter where you live in Canada.

    • All credit scores welcome: Get approved with bad credit or no credit.
    • Personal loans up to $35,000: Loans range between $500 to $35,000 so you can cover everything from home renovations to life’s unexpected surprises.
    • Apply from home: Submit an application online or speak to a live agent over phone or text message.
    • Lightning-fast approvals: Get approved and funded in less than 24 hours.
    • Flexible repayment schedules: Terms last between nine to 60 months so you can pay your loan back when it’s convenient for you.
    • No hidden fees: Never pay application fees, maintenance charges, and other hidden costs.
    • Reputable online lender: See what over 1,000 customers say on Trustpilot.

    Ready to get your personal loan? Apply online in two minutes.

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