Reasons a Personal Loan May Be Denied

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If your application for a personal loan is denied, you're entitled to find out why. Under the Equal Credit Opportunity Act, a lender is required to tell you the specific reason it denied your loan application, or tell you that you have the right to find the reason out if you ask within 60 days. Once you know why you were denied, you can take corrective action to keep it from happening again.

Low Credit Score

Lenders will deny your loan application if your credit score doesn't meet their cutoff. If that's the reason, your lender has to tell you the credit bureau that was used to make the decision, and what your score there is. You're entitled to a free copy of your credit report from each of the three major credit bureaus each year, and an additional copy if you were denied credit because of information that one contained. Check your report to make sure there aren't derogatory entries there in error. If so, file a dispute with the credit bureau to get it removed.

Lack of Income

You generally have to prove your income to be approved for a loan, since the lender wants assurances that you are able to repay the obligation. Unless you make enough money from work or can document other income that you have coming in on a regular basis, your application may be denied. If you've recently lost your job or found a new one after a period of unemployment, you may not have the job stability required. If you're self-employed, you may need to provide evidence that you have a steady list of clients and long-term contracts that can keep your business afloat for the foreseeable future.

Excessive Debt

If you have too many loans outstanding, your personal loan application may be denied. It also may be denied if you've recently taken on additional debt, such as a mortgage or car loan. The sudden change in your debt profile may make a lender too nervous to extend you additional credit. You may need to reapply in a few months after you've shown you can handle the new obligations or pared down your existing stable of loans.

Poor Documentation

You have to submit the required paperwork to get approved for a personal loan, and can get denied if you can't submit the required documentation. You also may be denied if there are conflicts between what you offer and what the lender can verify. For example, if you say you make $100,000 a year and a call to your employer reveals that your annual salary is $55,000, that may lead to a rejection. In that scenario, you may need to provide additional proof, such as W-2s or 1099 forms, that document your claims.


Lenders are prohibited from denying a personal loan based on race, color, gender, religion, national origin or marital status. They also can't deny credit to someone who would otherwise qualify based on age, as long as the applicant is old enough to legally enter into the contract. If you believe you were denied a loan because of discrimination, file a complaint with the Consumer Financial Protection Bureau.