Personal loans are often used when people are in a crisis, want to make a large purchase, or even work on their credit. However, there are many times when people are rejected for their personal loans. This can be a hug set back for many people, especially if they were counting on the money for various things. One of the best things you can do as a consumer is understand why your application was rejected and what you can do to better qualify for a personal loan in the future.

It might not seem like an important thing right now, but when you are in a pinch, it is important to know these things. Luckily, the Equal Credit Opportunity Act, which is a federal act, actually requires that lenders tell you why you were rejected for the personal loan. Unfortunately, they don’t always tell the full details. If you’ve experienced this reject several times, there might be a few underlying reasons why you keep getting rejected. Here is what you need to know.

Credit File Size

When building your credit, it can be kind of tricky. You must have a good credit score in order to qualify for any loan, but making payments on another loan or debt is the only way to improve your overall credit score. Little to no experience using credit can be a huge issue when it comes to people applying for loans. Instead of getting a personal loan, a credit card might be a better option.

Credit cards are found in both secured and unsecured card options. Secured cards are ideal for those with no credit or bad credit since they require a cash deposited to obtain approval. Unsecured cards are better for building up credit to improve your personal loan odds in the future.

Credit Report Errors

Believe it or not, errors on a credit report are pretty common. They are also a huge factor in the prevention of people getting personal loans. The FTC, or the Federal Trade Commission, has found that as many as one error is on the credit file of every one in four individuals. These errors include things like incorrectly reported errors, accounts that are closed but showing open, and even late payment inaccuracies. These errors can truly cause your credit score to drop.

If you suspect you might have an error on your credit report, you can always check to see if something looks off. If you find an error, be sure to file a disputed with the specific credit bureau that has completed that portion of your report.

Your Debt

The amount of debt-to-income ratio you have is an import factor in determining whether you qualify for a personal loan or not. Basically, this means that your income that you bring home needs to cover the amount of debt you have every month. Personally are often used to consolidate existing forms of debt, and they often have a lower interest rate. However, if you already have quite a bit of money, you might not qualify for the loan.

Typically, this is looked at when you have as much as 50-percent of your earnings being paid toward debts. It is a red flag, and they are likely to flag you as a high-risk consumer. If you’re having troubles getting a personal loan, you should consider your debt and how much you have at the moment.


Another thing to consider as you apply for a personal loan is the details. They have often been known to be very tricky applications, and there are many pieces of vital information that lenders want to look at before they make a decision. Including things like your source of income, work history, and whether you have any other income sources is important to note to the lender. If you accidentally forget these things, then you’ve already hurt yourself right out of the gate.

Before submitting any loan applications, be sure to look over the information in the application. Correct any mistakes that are on the paperwork before you hand it in or submit it to the lender. If you aren’t sure what sort of information they need, you can always ask while obtaining your application.


When you are preparing to apply for a personal loan and have had issues in the past, then you will be surprised to know that there are several factors that go into your loan decision. Before you apply for a personal loan again, try a few of the tips in the article above. It might be useful to better understand your credit report, how credit works, and why you aren’t being approved. It isn’t always an easy thing to deal with when your loan application is denied, but with just a little understanding, you can better prepare for the future.