Loan rejection
Loan refusals
If your loan application has been rejected, there are some
things you can do. Follow our simple steps before you try to apply
for credit again.
Why do credit providers reject
loans?
Your loan may have been rejected because:
- You have defaults on your credit report (overdue payments of 60
days or more where debt collection activity has started)
- Your credit report includes missed repayments to a credit
provider (such as a bank) that are more than 14 days past the due
date
- After considering your income and your existing debts, the
credit provider thinks you may struggle to make the loan
repayments
- You do not have enough money saved in your bank account to
prove that you can make the loan repayments
The law states that your credit provider must lend you money
responsibly. This means that they must not lend you money if they
think the credit is unsuitable for you.
If your loan application has been rejected, it is possible that
the credit provider decided that the credit was not right for you
and you would not be able to keep up with the repayments.
Read more about consumer credit
regulation.
What you can do to improve your
next loan application
- Get a copy of your credit report - See credit reports to
find out how you can correct a wrong report or build up a better
credit history
- Reduce your debts - See making
repayments to see which debts to minimise first
- Create a budget - See how to do a
budget. If you stick closely to your budget you can build up
some savings to show the credit provider that you can make
repayments on any future loans.
- Reorganise your debts - See consolidating and
refinancing debts to find out how this strategy can help shrink
your debts
- Seek help - If you are struggling with debts
you should seek help from a financial counsellor. Getting
your finances back on track will give you confidence when you next
apply for a loan.
Case study: Sally's car loan is rejected
Sally applied for a
personal loan at her bank. She wanted to borrow $10,000 to buy a
second-hand car. She thought the bank would accept her loan
application as her job in a clothing store paid enough to cover her
rent, bills and the loan repayments. Sally was disappointed when
the bank rejected her application. They felt she would not be able
to make the loan repayments as she also has a $5000 credit card
debt to pay off and no savings in her bank account. Sally decided
to focus on paying off her credit card and build up some
savings before she applied for another loan.
Other loan options
You can try another credit provider to see if they will accept
your application but you may risk getting rejected again. It would
be better for you to assess your financial situation first, pay off
some debts and build your savings, before you try again.
It also does not look good on your credit report for you to make
multiple loan applications in a short period of time.
Find a guarantor
You may be able to strengthen your loan application by asking
someone to 'go guarantor' for you. But be cautious about
doing this as it can be risky for the guarantor. See loans involving family
and friends for more information.
Apply for a no interest loan
You could also apply for a no or low-interest loan. These
loans are for people on a low income who urgently need to buy an
essential item like a fridge or washing machine.
If you are applying for another loan, always
check the interest rate, fees and charges before
you sign up. See getting the best credit
deal for more details.
Related links
Last updated: 26 Sep 2018
