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

Young woman looking at how she can improve her financesSally 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: 05 Nov 2019